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| Topic: |
Business
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| Number of pages / Number of words: |
7 / 1953 |
Essay's paper body
We can see in the diagram below that the provision and consumption of health care services results in an increase in social benefits and a reduction in social costs, hence the people should be encouraged to increase their consumption of health care services.
FIGURE 1: This figure illustrates the implications for the optimality rules of a positive externality...
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The market equilibrium in this situation occurs at quantity Qp and price Pm where the MPB equals MC. However this item produces an external benefit (b) which the market does not take into account by the market. The socially optimal quantity of this item actually occurs where the marginal social benefit (MSB) curve derived by summing the private marginal benefit and the external benefit, equals the marginal cost of producing the item...
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