Consider the market for milk. Draw a supply curve and a demand curve (is the demand curve elastic on inelastic). Label the equilibrium price and quantity. Suppose that the production of milk causes some environmental damage (e.g., water pollution, greenhouse gases). Illustrate this externality and the socially optimal quantity of milk. Illustrate the market equilibrium for college education. Demand is fairly inelastic. Illustrate the socially optimal quantity of education (what type of externality is there in the market for college education?

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To address your question Ill provide an overview of how the market for milk and college education can be illustrated including the concepts of supply and demand externalities and the socially optimal ... View the full answer