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Economics A Level (DONEEEEEEE)

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Question:

How can Overproduction come due to Ignoring Negative Production Externalities?

Author: eric_galvao

How can Overproduction come due to Ignoring Negative Production Externalities?



Answer:

-Simplistic Sake, MPB = MSB. But MSC and MPC are Different Lines, so have their Own Intersections with MPB [MSB too] -This creates their own Quantity at the Given Price Level -Negative Production Externalities will have the MSC Higher than the MPC, so therefore, MSC will have a Lower Quantity than MPC -Therefore, an Overproduction of MPC Quantity X = MSC Quantity Y will Occur. [And at Lower Price too]


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-Simplistic Sake, MPB = MSB. But MSC and MPC are Different Lines, so have their Own Intersections with MPB [MSB too]
-This creates their own Quantity at the Given Price Level
-Negative Production Externalities will have the MSC Higher than the MPC, so therefore, MSC will have a Lower Quantity than MPC
-Therefore, an Overproduction of MPC Quantity X = MSC Quantity Y will Occur. [And at Lower Price too]
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