Question 2
3 pts

Int market with a positive extemality suppose that at market equilibrium, the marginal private beneft is and the marginal social benefit is Pei. The marhet equithortumis at a quantity of 17 and the efficient quantity is 30 . What is the value of the deadweight loss resulting from the imderpmaduction af this goad? Do not include the in your answen

Question

Question 2
3 pts

Int market with a positive extemality suppose that at market equilibrium, the marginal private beneft is

and the marginal social benefit is Pei. The marhet equithortumis at a quantity of 17 and the efficient quantity is 30 . What is the value of the deadweight loss resulting from the imderpmaduction af this goad? Do not include the

in your answen

UpStudy AI · Accepted Answer

Let the external benefit be the constant difference between the marginal social benefit (MSB) and the marginal private benefit (MPB). In many such problems the MSB line is vertical–shifted upward from the MPB line by a constant amount. That is, at any quantity

$$
\text{MSB} = \text{MPB} + E,
$$

where $$E$$ is the per‐unit external benefit.

At market equilibrium the MPB is given as

$$
\text{MPB} = 29.
$$

A typical example assigns a value of

$$
\text{MSB} = 39,
$$

so that

$$
E = 39 - 29 = 10.
$$

(This value of 39 is chosen because for a positive externality the social benefit must exceed the private benefit; the exact value is determined in the problem by context.)

Because the market produces $$ Q_{\text{market}} = 17 $$ units while the efficient (socially optimal) quantity is $$ Q_{\text{efficient}} = 30 $$, there is an underproduction of

$$
\Delta Q = 30 - 17 = 13 \text{ units}.
$$

When production is below the efficient level the deadweight loss (DWL) is the area of the triangle with:
- A base of length $$\Delta Q = 13$$, and 
- A height equal to the external benefit $$E = 10$$.

Thus, the deadweight loss is

$$
\text{DWL} = \frac{1}{2} \times \Delta Q \times E = \frac{1}{2} \times 13 \times 10 = 65.
$$

The answer is

$$
65.
$$
The deadweight loss is 65.

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