Chapter 10 Questions for Review answers

Chapter 10 Questions for Review answers - Chapter 10...

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Chapter 10 Questions for Review 1. Examples of negative externalities include pollution, barking dogs, and consumption  of alcoholic beverages. Examples of positive externalities include the restoration of  historic buildings, research into new technologies, and education. (Many other  examples of negative and positive externalities are possible.)  2. Figure 1 illustrates the effect of a negative externality. The equilibrium quantity  provided by the market is  Q market . Because of the externality, the social cost of  production is greater than the private cost of production, so the social-cost curve is  above the supply curve. The optimal quantity for society is  Q optimum . The private  market produces too much of the good because  Q market  is greater than  Q optimum . Figure 1 3. The patent system helps society solve the externality problem from technology  spillovers. By giving inventors exclusive use of their inventions for a certain period, 
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Chapter 10 Questions for Review answers - Chapter 10...

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