13th Edition
Roger A. Arnold
ISBN: 9781337617406




13th Edition
Roger A. Arnold
ISBN: 9781337617406
Textbook Problem

Explain why the shaded triangle in Exhibit 3 is representative of a market failure.

To determine

Identify the shaded area.


Figure 1 shows the market failure.

In Figure 1, the vertical axis measures price and cost. The horizontal axis measures quantity. The upward sloping curve “S” is the supply curve (MPC+MSC)  . The downward sloping curve “D” is the demand curve (D=MPB)  

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