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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

Consider the market for fire extinguishers.

a. Why might fire extinguishers exhibit positive externalities?

b. Draw a graph of the market for fire extinguishers, labeling the demand curve, the social-value curve, the supply curve, and the social-cost curve.

c. Indicate the market equilibrium level of output and the efficient level of output. Give an intuitive explanation for why these quantities differ.

d. If the external benefit is $10 per extinguisher, describe a government policy that would yield the efficient outcome.

Sub part (a):

To determine
The positive externality of fire extinguishers.

Explanation

The fire extinguisher provides positive externality. This is because one person buys it for his own use, but the use of the fire...

Sub part (b):

To determine
The positive externality of fire extinguishers.

Sub part (c):

To determine
The positive externality of fire extinguishers.

Sub part (d):

To determine
The positive externality of fire extinguishers.

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