21) Diagram Showing A Positive Externality Of Consumption

Question 0

State the evaluation of the theory of positive externalities

Answer 0

⚫️imperfect knowledge

⚫️measuring private and external benefit

⚫️size of potential welfare gain

Question 1

Describe the diagram label of positive externality of consumption

Answer 1

⚫️downward sloping
➡️MSB=(MPB+MEB)
➡️MPB
➡️label between them-positive externality
➡triangle between them-potential welfare gain arising from positive externalities

⚫️upward sloping
➡️MSC=MPC

⚫️price-PSO
➡️meets QSO
⚫price-PFM
➡️meetsQFM

⚫label ️between QFM-QSO
➡️under consumption and under production

Question 2

Give an example of imperfect knowledge being a limitation of positive externality of consumption among education

Answer 2

⚫️long-term benefit of having more educated people
➡️difficult to measure
➡️depends on what course they study
➡️and usefulness in the future

Question 3

Give an example of measuring private and external benefit being a limitation of the positive externalities, of flu vaccination

Answer 3

⚫️how do you put monetary value on
➡️private benefits of having flu vaccinations
➡️let alone external benefits of a number of people having flu vaccinations

Question 4

Why is size of the potential welfare gain or loss a limitation of positive externalities theory

Answer 4

⚫️estimation of knowledge and measuring private benefits

➡️harder for government interventions to fully increase welfare