5 Steps to a 5: AP Microeconomics 2021 by Eric R. Dodge

Author:Eric R. Dodge
Language: eng
Format: epub
Publisher: McGraw-Hill Education
Published: 2021-01-15T00:00:00+00:00

Figure 11.4

• The existence of spillover costs in a market results in an overallocation of resources in that market. In other words, there is too much of a bad thing.

• In the presence of a negative externality, at Qmkt, the MSC is greater than MPC due to spillover costs. At the market quantity, MSC > MSB.

• Because the market ignores the spillover costs, deadweight loss exists and is seen as the shaded area between MSC and MPC and between Qsocial and Qmkt. At the socially efficient quantity, MSC = MSB, and there is no deadweight loss.

“I was always told to make big graphs to keep things clear. It ended up saving me from many careless errors.”

—Ross, AP Student

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