On the externality graph above, draw each of the
following if a negative production externality occurs:
*Draw the MSC curve and label it (MSC).
*Indicate the socially optimal price (P1) and quantity (Q1).
*Shade in the deadweight loss at the original P and Q.
On the externality graph above, draw each of the
following if a positive consumption externality occurs:
*Draw the MSB curve and label it (MSB).
*Indicate the socially optimal price (P1) and quantity (Q1).
*Shade in the deadweight loss at the original P and Q.