Marginal social cost higher than the marginal private cost

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Reference no: EM1323135

Q. A consumer has $400 to spend on goods X also Y. The marketplace prices of these two goods are Px=$10 also Py=$40.

a. Illustrate what is the marketplace rate of substitution between goods X also Y?

b. Illustrate the consumer's prospect set in a carefully labeled diagram.

c. Demonstrate how the consumer's prospect set changes if income increases by $400. How does the $400 increase in income alter the marketplace rate of substitution between goods X also Y?

Q. An industry which generates detrimental externalities will have a marginal social cost higher than the marginal private cost to the industry.

Reference no: EM1323135

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