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SingaporeEconomicsQuick questions
Market Failure and Intervention
Quick questions on Negative and positive externalities explained: H2 Economics
4short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.
What is positive externality (under-production)?Show answer
Take a positive externality in consumption, such as vaccination, which protects others by reducing disease spread. The marginal external benefit makes lie above . The market produces where , at , but the optimum is where , at Q^. Because individuals ignore the benefit to others, Q_m < Q^: the market under-produces.
What is q1?Show answer
Define a negative externality. [2 marks]
What is q2?Show answer
Explain why a positive externality leads to under-production. [3 marks]
What is q3?Show answer
Where is the welfare loss from a negative production externality shown? [2 marks]
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