Suppose that in greater Sydney, the demand for flowering plants is given by P = 60 - Q, and supply is given by P 0.2Q, where Q represents thousands of plants. Because people enjoy seeing flowers as they pass by others' houses, these plants produce a positive externality. Suppose that each plant produces a marginal external benefit equal to $6. 1. What will be the market price and the quantity supplied of flowering plants? 2. What is the socially optimal number of plants?
Suppose that in greater Sydney, the demand for flowering plants is given by P = 60 - Q, and supply is given by P 0.2Q, where Q represents thousands of plants. Because people enjoy seeing flowers as they pass by others' houses, these plants produce a positive externality. Suppose that each plant produces a marginal external benefit equal to $6. 1. What will be the market price and the quantity supplied of flowering plants? 2. What is the socially optimal number of plants?
Chapter8: Market Failure
Section: Chapter Questions
Problem 2P: Draw a standard supply and demand diagram for televisions, and indicate the equilibrium price and...
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