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Consider the market for fire extinguishers.
a. Why might fire extinguishers exhibit positive externalities?
b. Draw a graph of the market for fire extinguishers, labeling the demand curve, the social-value curve, the supply curve, and the social-cost curve.
c. Indicate the market equilibrium level of output and the efficient level of output. Give an intuitive explanation for why these quantities differ.
d. Label the deadweight loss associated with the market equilibrium. What does this area represent?
e. If the external benefit is $10 per extinguisher, describe a government policy that would yield the efficient outcome.
The steady increase in demand for home computers has resulted in the massive increase in demand for web access, yet, the price of access has been steadily declining.
Trade Restrictions Effects on Exchange Rates. Suppose that the Japanese government relaxes its controls on imports through Japanese firm.
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You know from data gathered on the widget market that market demand has recently increased and market supply has recently decreased. As manager of the facility, what decisions should you make regarding production levels and pricing for your widget..
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