Classify the items in the following list as markets, private externalities, or public goods. Illustrate each...

Classify the items in the following list as markets, private externalities, or public goods. Illustrate each externality graphically. Who is producing the externality? Who gains/loses in each case?

A.lighthouse warns ships about rocks.

B. Space trash falls out of orbit.

c. My building blocks your sunlight.

d. You outbid me at the auction.

e. Bees pollinate your apple trees.

f. Noise lowers the sale value of my house.

g. Buffy Summers spends her summers slaying vampires.

Solutions

Expert Solution

a. A lighthouse warns ships about rocks. Public goods

b. Space trash falls out of orbit. Public goods

c. My building blocks your sunlight. Private externality

d. You outbid me at the auction. Markets

e. Bees pollinate your apple trees. Private externality

f. Noise lowers the sale value of my house. Markets.

g. Buffy Summers spends her summers slaying vampires. Private externality

c. I’m producing the externality by blocking your sunlight, where I am gaining & you are losing.

e. Bees are producing externality by pollinating, where apple trees as well as bees are gaining. Because it’s a positive externality.

g. Buffy summers is producing externality by slaying Vampires, where he is gaining & Vampires are losing.

Rahul Sunny answered 1 year ago

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