Essays on Cost Curve

Assignment 5 Answers

2. a) Fire extinguishers might exhibit positive externalities because they are often used as public goods that serve all people including those who have not paid for them. Thus, the benefits of purchasing fire extinguishers are enjoyed by other individuals who were not involved in the transaction. b) A graph of the market for fire extinguisher

S= private marginal benefit/ social cost curve SCC= Social Cost Curve SVC=Social value curve The equilibrium output level is indicated by Q1. However, the social demand is higher than the social cost since fire extinguishers exhibit positive externalities. Thus, Q2 is the market's ...

Market Structure

In simple terms, market structure refers to the classification of the various types of markets, based on their unique features on how they allocate prices of a given product in the market. The aspect is primarily classified into two, which include perfect and imperfect market.

Oligopoly

Refers to a type of market structure where there are few sellers in a given economy with many buyers for the commodity. With oligopoly, the sellers have an influence on the commodity price in the market and can significantly affect competition. An example of a company to indicate the above case is the mobile ...

Externalities take place when consumers/manufacturers activities have an unintentional or indirect impact on other consumers/manufacturers without affecting prices. According to Sankar, externalities may cause positive and negative effects (6). In other words, if the consumer or a group grants certain benefits to other economic agents, the externality is positive; if any activity is disadvantageous to other groups or individuals, then the externality is negative (7). According to Stiglitz (216), “Externalities arise whenever an individual or firm undertakes an action that has an effect on other individual or firm”. The externalities phenomenon tends to have a spillover effect in the ...