Micro 6.1-Defining Externalities-Externality #2-Fire Department - Michael Burbine | Biblioteka

Today we will watch 4 video clips. Each video clip will help us discover one of the 4 types of externalities.

https://www.youtube.com/watch?v=WdMDxJ43WS0

Externality #2. The Fire Department Let's the House Burn

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In 1-2 sentences, briefly describe/discuss the economics decision-makers (producers and consumers) in the clip.

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Yes

No

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goods and services were being underproduced.

goods and servces were being overproduced.

goods and services were being overconsumed.

goods and services were being underconsumed.

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Supply

Demand

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The producers should internalize the cost of the negative externality with a per-unit tax.

The producers should externalize the benefit of the positive externality with a per-unit subsidy.

The consumers should internalize the cost of the negative externality with a per-unit tax.

The consumers should externalize the benefit of the positive externality with a per-unit subsidy.

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Negative externality in production

Positive externality in production

Negative externality in consumption

Positive externality in consumption