Positive consumption Externality
cost 1 Benefit
^
\
Msci MPC is
÷
Positive consumption externality
--l
q* = socially optimum output
\
q1 = market output
I EZ A = welfare gain
\ A
- -•
PA
-
g
- - -
-
-
- - - -
,
a
/ p
,
-
l
Here we can see that there is under
consumption of the good, so in order to
l
l
l
l
correct the market failure, the quantity of
l l the good consumed needs to increase.
l l
l
MPB j D2
l
l
' MSB i
l
l
MPB D
-
l
l -
l l
i
i
#Quantity
q, q*
→
Positive production Externality
cost I Benefit S
Mpc
;µ ;,←
-
^ -
×
Mpcz sa
-
=
Msc
-
Positive production externality
q* = socially optimum output
El
q1 = market output
-
-
-
-
I .
A = welfare gain
Here we can see that there is under
production of the good, so in order to
correct the market failure, the quantity of
l
l the good produced needs to increase.
l
l MSB -
.
MPB =D
l
l
l
l l
# Quantity
9, 9't
→
cost 1 Benefit
^
\
Msci MPC is
÷
Positive consumption externality
--l
q* = socially optimum output
\
q1 = market output
I EZ A = welfare gain
\ A
- -•
PA
-
g
- - -
-
-
- - - -
,
a
/ p
,
-
l
Here we can see that there is under
consumption of the good, so in order to
l
l
l
l
correct the market failure, the quantity of
l l the good consumed needs to increase.
l l
l
MPB j D2
l
l
' MSB i
l
l
MPB D
-
l
l -
l l
i
i
#Quantity
q, q*
→
Positive production Externality
cost I Benefit S
Mpc
;µ ;,←
-
^ -
×
Mpcz sa
-
=
Msc
-
Positive production externality
q* = socially optimum output
El
q1 = market output
-
-
-
-
I .
A = welfare gain
Here we can see that there is under
production of the good, so in order to
correct the market failure, the quantity of
l
l the good produced needs to increase.
l
l MSB -
.
MPB =D
l
l
l
l l
# Quantity
9, 9't
→
