Figure: Positive Externality

question 13

Short Answer

Figure: Positive Externality
The figure shows the market for a good that when consumed causes an external benefit. Suppose the government decides to begin issuing a subsidy to the consumers of the good. Using the information provided in the figure, answer the following questions.
a. What is the initial market quantity in this market?
b. What is the social benefit of the product?
c. When the consumers of the product are subsidized, what is the dollar amount of deadweight loss that is removed from the market?
d. What is the new efficient quantity in this market after the subsidy has been allocated?

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Definitions:

Puberty

The stage of human development during which children become sexually mature and capable of reproduction, marked by physical, hormonal, and emotional changes.

Nutrition

The science that interprets the interaction of nutrients and other substances in food in relation to maintenance, growth, reproduction, health and disease of an organism.

Medical Care

The provision of services by healthcare professionals to diagnose, treat, and prevent illness, injury, and other physical and mental impairments in individuals.

Pollution

The presence or introduction of harmful or poisonous substances into the environment, causing adverse effects on living organisms and ecosystems.