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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

Table 12.12 , shows the supply and demand conditions for a firm that will play trumpets on the streets when requested. Chapter 12, Problem 42P, Table 12.12 , shows the supply and demand conditions for a firm that will play trumpets on the , example  1 is the quantity supplied without social costs. Chapter 12, Problem 42P, Table 12.12 , shows the supply and demand conditions for a firm that will play trumpets on the , example  2 is the quantity supplied with social costs. What is the negative externality in this situation? Identify the equilibrium price and quantity when we account only for private costs, and then when we account for social costs. How does accounting for the externality affect the equilibrium price and quantity?

Chapter 12, Problem 42P, Table 12.12 , shows the supply and demand conditions for a firm that will play trumpets on the , example  3

To determine

With the given table, find out negative externality, equilibrium price and quantity with and without social costs. how does accounting for externality affect equilibrium price and quantity.

Explanation

Negative externality is shown by shaded area .Equilibrium price and quantity is P1($9) and P2($5) without social cost. With social cost price shifts upwards to P2($12) and quantity supplied will reduce to quantity ($3.75)...

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