Diagrams

• Negative production externality

  
• Positive production externality

  
• Negative consumption externality

  
• Positive consumption externality

  
• Why does society want Q*soc and why the triangle represents a welfare loss

  The triangle represents a welfare loss because it’s showing the eternal cost and which way it’s moving. As society wants a quantity that is allocatively efficient, in this case, they want less of the negative production. They want the best utility. Maximum happiness of society
• Explain why noice pollution from a flight would be a negative production externality 


  As the way of the flight (the production) is causing disruption to a 3rd party. MSC is less than MPC. Pmkt & Qmkt is more than need to spend money on soundproof P*soc and Q*soc
• Explain why a company training engineering apprentices would be a positive production externality 


  A good thing for everyone, helps create more skilled orders for the industry and promotes growth and innovation
• Explain why consuming illegal drugs would be a negative consumption externality 


  Reduces well-being of others also. The social cost is greater than private
• Explain why putting up lights on your house would be a positive consumption externality


  Spreads joy to the neighbourhood. Happier sight for everyone