2 part question

use the notes BELOW (not Google):

FIGURE 1

FIGURE 2

6 Study and follow Fig. 1 in Class Note 6 Give your own example of negative externalities related to an information service provided by a for-profit firm. Explain how the for-profit firm maximizes its profits at expense of the society and increases social cost 7 Study and follow Fig. 2 in Class Note 6 Give your own example of positive externalities of a service provided by a nonprofit organization. Explain how a government agency (federal or state or municipal) can help the nonprofit organization increase social benefits by expanding and financing its service fig Price Social Cost Private Cost External Cost Ps Pp Benefit Qs Quantity The private cost equilibrium level of junk mail is at (Pp, Qp) where the private cost (marginal cost, or supply) curve intersects the demand (marginal benefit) curve. At (Pp,Qp), the profit is maximized (MC=MB). for the advertising firm sending out junk mail. Beyond (Pp, Qp,), the marginal cost is larger than the marginal benefit. So the advertising firm will stop sending out junk mail. The social cost equilibrium level is at (Ps, Qs) where the social cost curve intersects the demand (benefit) curve. At this point the social benefit is maximized since the social marginal cost = marginal benefit (demand). However, the advertising firm does not care about the social cost and will continue to sent out junk mail until (Pp, Qp). Between (Qs) and (Qp, the society pays for (Qp-Qs) quantities of junk mails at (Ps- Pp prices since the social marginal cost is larger than the marginal benefit. Fig 2 shows Positive Externalities:a private skating rink open for the general public Price Supply Pp External Benefit Social Benefit Private Benefit Qp Qs Quantity -a private skating rink designed for figure skating and hockey games -the firm provides Qp number of sessions at Pp price for both figure skating and hockey games -the city government wants it to open to general public skating by proving a city park site for the rink construction -the costs of operating and maintaining the rink have increased to Ps due to more offered sessions at Qs so the supply curve shift to right to reflect increased services and costs -the additional cost from the private cost to the social cost of the rink (from Pp to Ps) is subsidized by the city government - as a result the general public benefits from the rink, meaning everyone other than figure and hockey skaters can enjoy skating at the rink