Which of these statements about externalities is true? a.Positive externalities yield a market equilibrium quantity that is higher than the efficient quantity. b.Negative externalities cause the social (total) demand curve to be higher than the private (internal) demand curve. c.Negative externalities create a market failure but no deadweight loss. d.Positive externalities cause the social (total) demand curve to be higher than the private (internal) demand curve. e.Negative externalities are nonrival and nonexcludable
Q) Which of these statements about externalities is true?
a.Positive externalities yield a market
b.Negative externalities cause the social (total)
c.Negative externalities create a market failure but no
d.Positive externalities cause the social (total) demand curve to be higher than the private (internal) demand curve.
e.Negative externalities are nonrival and nonexcludable
Note:- Explain it correctly. Not copy paste anything from anywhere.
Externality refer to effects (bad or good) that are realized by individuals or third parties who are not involved in the market exchange. Thus, a negative externality is a cost and positive externality is a benefit which is not reflected in the goods price. Presence of an externality leads to market failure, whether it is negative or positive externality.
a) The negative externality lead a market to produce greater than efficient output levels. For example, a firm producing steel also produces pollution as a by-product. The pollution is a negative externality for the people living nearby. Therefore, the firm will not curb the production of steel and the output of pollution will be higher than the efficient pollution. Similarly, the positive externality leads a market to produce smaller than efficient output levels.
Therefore, this statement is false.
b) The market demand curve (internal) shows the demand when individuals pay attention to only their internal benefits. For example, a smoker will consider his demand only. The demand of an individual when he will consider the social cost of others near him. It will have a lower demand curve (social).
Therefore, the sentence is false.
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