1. What type of externality (positive or negative)is described in
each of the following examples? Is the marginal social benefit
of the activity greater than or equal to the marginal benefit to
the individual? Is the marginal social cost of the activity
greater than or equal to the marginal cost to the individual?
Consequently, without intervention, will there be too little or
too much(relative to what would be socially optimal) of this
activity?
a. Mrs Chau plants lots of colourful flowers in her front yard.
b. Anna Crombie and Fritz, a popular clothing store, open ina lot of
small, attracting more shoppers who also visit other stores.
c. The fraternity next to your dorm plays loud music, keeping
you from studying.
d. Maija, who lives next to an apple orchard, decides to keep
bees to produce honey.
e. Justine buys a large SUV that consumes a lot of gasoline.
1. What type of externality (positive or negative)is described in
each of the following examples? Is the marginal social benefit
of the activity greater than or equal to the marginal benefit to
the individual? Is the marginal social cost of the activity
greater than or equal to the marginal cost to the individual?
Consequently, without intervention, will there be too little or
too much(relative to what would be socially optimal) of this
activity?
a. Mrs Chau plants lots of colourful flowers in her front yard.
b. Anna Crombie and Fritz, a popular clothing store, open ina lot of
small, attracting more shoppers who also visit other stores.
c. The fraternity next to your dorm plays loud music, keeping
you from studying.
d. Maija, who lives next to an apple orchard, decides to keep
bees to produce honey.
e. Justine buys a large SUV that consumes a lot of gasoline.
