(Solved): An externality arises when a firm or person engages in an activity that affects the weill-being o ...

An externality arises when a firm or person engages in an activity that affects the weill-being of a third party, yet neither any compensation for that effect. If the impact on the third party is beneficial, it is called a The following graph shows the demand and supply curves for a good with this type of externality. The dashed drop lines on the graph refle market equilibrium price and quantity for this good. reflect the social costs of producing the good; similarly, if there are external benefits from production, then you should shift the demand curve to reflect the social benefits from consuming the good. With this type of externality, in the absence of government intervention, the market equilibrium quantity produced will be than the efficient quantity. Which of the following generate the type of externality previously described? Check all that apply. Your roommate, Hilary, has bought a cat to which you are allergic. The city where you live has granted a permit to put a movie theater in your neighborhood, causing traffic jams at night and on weekends. A microbiology lab has published its breakthrough in swine flu research. Tim has planted several trees in his backyard that increase the beauty of the neighborhood, especially during the fall foliage season.