Parks confer many external benefits on society: open space, trees that reduce po

Question

Parks confer many external benefits on society: open space, trees that reduce pollution, and so on. Therefore, the market equilibrium quantity of parks is not equal to the socially optimal quantity. The following graph shows the demand for parks (their private value), the supply of parks (the private cost of producing them), and the social value of parks, including both the private value and external benefits. Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity. 5615217_2Only image found

Explanation / Answer

INTERSECTING POINT OF DEMAND CURVE AND SUPPLY CURVE IS THE THE MARKET EQUILIBRIUM.

INTERSECTING POINT OF DEMAND CURVE AND SOCIAL VALUE CURVE IS THE SOCIALLY OPTIMAL LEVEL.

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