Explain, in the context of market failures, what is meant by a positive externality. [1] Consider...

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Explain, in the context of market failures, what is meant by a positive externality. [1] Consider the market for fire extinguishers. Assuming fire extinguishers are currently sold at a constant price P, draw a graph labelling the demand curve and the marginal social benefit. Identify on the graph the market equilibrium level of output and the socially optimum level of output. [3] Outline the form of government intervention you would recommend in this scenario. [1] Explain, in the context of market failures, what is meant by a positive externality. [1] Consider the market for fire extinguishers. Assuming fire extinguishers are currently sold at a constant price P, draw a graph labelling the demand curve and the marginal social benefit. Identify on the graph the market equilibrium level of output and the socially optimum level of output. [3] Outline the form of government intervention you would recommend in this scenario. [1]

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Market failures is a situation in which there is an inefficient allocation of goods and services by the free market in which the Pareto efficient does ... View the full answer