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Spillover costs and benefits

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What divergences arise between equilibrium output and efficient output when spillover benefits and costs are present? Provide some "real-life" occurrences where both a positive and negative externality took place. What was the role of outside market forces in these situations?

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Solution Summary

The expert determines what divergences which arise between equilibrium output and efficient outputs when spillover benefits and costs are resent.

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When spillover benefits occur, the equilibrium output will be less than the efficient
output because the consumer is willing to pay a price equal to the consumer's individual marginal benefit, but no more.

When ...

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