Question

externalities - definition and examples an externality arises when a firm or person engages in an activity that affects the wellbeing of a third party, yet neither pays nor receives any compensation for that effect. if the impact on the third party is adverse, it is called a externality. the following graph shows the demand and supply curves for a good with this type of externality. the dashed drop lines on the graph reflect the market equilibrium price and quantity for this good. adjust one or both of the curves to reflect the presence of the externality. if the social cost of producing the good is not equal to the private cost, then you should drag the supply curve to reflect the social costs of producing the good; similarly, if the social value of producing the good is not equal to the private value, then you should drag the demand curve to reflect the social value of consuming the good. demand supply price (dollars per unit) quantity (units) demand supply with this type of externality, in the absence of government intervention, the market equilibrium quantity produced will be than the socially optimal quantity. which of the following generate the type of externality previously described? check all that apply. your roommate simone has bought a cat to which you are allergic. edison has planted several trees in his backyard that increase the beauty of the neighborhood, especially during the fall foliage season. the city where you live has turned the publicly owned land next to your house into a park, causing trash dropped by park visitors to pile up in your backyard. a leading electronics manufacturer has discovered a new technology that dramatically improves the picture quality of plasma televisions. firms of all brands have free access to this technology.

Answer 1

An externality affects third parties not involved in an economic activity, causing market failures when social costs (negative externalities) or benefits (positive externalities) aren't accounted for, leading to overproduction or underproduction respectively.

Step-by-step explanation:

An externality is a consequence of an economic activity experienced by unrelated third parties; it can be positive or negative but is not reflected in the cost of the goods or services involved. Externalities can lead to market failures where the full social costs or benefits of production and consumption are not reflected in market prices. Particularly, when negative externalities are present, such as pollution, the market quantity of a good produced exceeds the socially optimal level because the supply curve fails to include all social costs of production, leading to overproduction relative to what would be socially beneficial.

Examples of negative externalities include pollution from a factory that affects the health of nearby residents or noise from an airport that disrupts the surrounding community. Conversely, positive externalities could involve situations like education, where people who are educated contribute to the economy's productivity, benefiting others who did not pay for their education, or someone's decision to get vaccinated, which contributes to herd immunity.