Assignment 5 Answers
2. a) Fire extinguishers might exhibit positive externalities because they are often used as public goods that serve all people including those who have not paid for them. Thus, the benefits of purchasing fire extinguishers are enjoyed by other individuals who were not involved in the transaction. b) A graph of the market for fire extinguisher
S= private marginal benefit/ social cost curve SCC= Social Cost Curve SVC=Social value curve The equilibrium output level is indicated by Q1. However, the social demand is higher than the social cost since fire extinguishers exhibit positive externalities. Thus, Q2 is the market's ...