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From course:

Economics A Level (DONEEEEEEE)

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Question:

How can a Production Externalities be shown on a Diagram and say where the Lines would be for Negative and Positive

Author: eric_galvao



Answer:

-Y Axis = Price, Costs, Benefits. X Axis = Quantity -One line will be the Marginal Private Cost [MPC] - Cost of Producing the Last Unit of Food -Another line be the Marginal Social Cost [MSC] - MPS + The External Outcome -Difference between MPC & MSC is the External Cost of Production. -If the MSC is Higher than the MPC, its Negative. If the MSC is Lower than the MPC, its Higher.


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