OpenStudy (anonymous):

When looking at this graph (https://docs.google.com/document/d/1HmDPAGxbohTY_zeZZowCfCGejv3wntOV3EcofVYAajk/edit?usp=sharing) how do I know that is its a positive or negative externality? Also, assuming it is a monopoly, should the government tax or subsidy and how much? I know the socially optimal quantity is at Q2, but not sure how to figure out the rest.

3 years ago
OpenStudy (rane):

i can't open the link here, its not working

3 years ago
OpenStudy (rane):

but to know how to determine a positive and negative externality own a graph, u can have a look at this slideshow http://www.slideshare.net/vicarick/externalities-graphs-how-i-understand-them

3 years ago
OpenStudy (anonymous):

You should be able to see it now, I accidentally hit the wrong button for sharing. And I took a look at that one, but it didn't help a ton.

3 years ago
OpenStudy (rane):

did u had a look on the slideshow that i have given u ?

3 years ago
OpenStudy (anonymous):

Yep, it didn't help a ton though. I'm still confused on how to know if its a positive or negative externality from looking at the graph and how to determine the subsidy or tax.

3 years ago