Draw the Demand and Supply Curve for a Good with an Inframarginal

question 15

Essay

Draw the demand and supply curve for a good with an inframarginal external benefit.Clearly label the axis and equilibrium point.Using your graph,describe why the equilibrium level of output is efficient.

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Definitions:

Externality

A cost or benefit arising from an economic activity that affects third parties who did not choose to incur that cost or benefit.

Incentive

Something that motivates or encourages an individual or entity to act in a certain way.

Costs And Benefits

This is an analysis approach that compares the potential outcomes and implications, in terms of costs and benefits, of an action or decision.

Marginal Social Benefit

The extra advantage to society that comes from using an additional unit of a product or service.