Graph 4 -unity - Aue Demand a, Quantity According to Graph 4, after the tax is l

Question

Graph 4 -unity - Aue Demand a, Quantity According to Graph 4, after the tax is levied, consumer surplusis represented by area: A. A B. A +B+C C. D+E+F D. F positive consumption externality occurs wh Jack receives personal benefits from his own consumption of a certain good B. Jack receives a benefit from John's consumption of a certain good C. Jack's benefit exceeds John's benefit when they each consume the same good D. Jack's consumption is not beneficial to John 4,Ihternalising a positive production externality will cause the demand curve faced by an industry o: uction externality will cause the demand curve faced by an industry to: shift to the right B. shift to the left C. become more elas D remain unchanged

Explanation / Answer

1) In the diagram we can see that after the imposition of tax the price paid by consumers is P3 . Price received by producers is P2 . So consumer surplus is area above the price paid by consumers and below the demand curve which is represented by area A . Answer : A) A

2) A positive consumption externality occurs when a third party is benefitted due to an economic activity between two parties . Answer : B) Jack receives a benefit from John's consumption of a certain good .

3) Internalizaing a positive production externality is usually done by providing a subsidy . So the demand curve remains unchanged . Answer : D. Remain unchanged .

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