Scenario 10-4 the Demand Curve for Fire Extinguishers Slopes Downward and the and the Supply

question 125

Essay

Scenario 10-4
The demand curve for fire extinguishers slopes downward and the supply curve for fire extinguishers slopes upward. The production of the 500^th fire extinguisher entails the following:
• a private cost of $10;
• an external cost of $0;
• a private value of $9;
• an external benefit of $3.
-Refer to Scenario 10-4. In order to reach the social optimum, should fire extinguishers be taxed or subsidized? What is the appropriate amount of the tax or subsidy on each fire extinguisher?

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Definitions:

Acid Rain

Precipitation that has been made acidic by atmospheric pollution, leading to environmental harm, particularly in forests and lakes.

Risk Analysis

The process of identifying, evaluating, and prioritizing risks followed by coordinated efforts to minimize or control their impact.

Ecological Problem

Issues that arise when the natural balance of ecosystems is disturbed, leading to environmental harm and decreased biodiversity.

Industrial Smog

A type of air pollution generated from industrial operations and fossil fuel combustion, characterized by a mix of particulates and gases.