<p>The S and SE curves appear the wrong way round. The free mkt outcome is over-fishing, the optimal soln. is less than free mkt.</p>

CC BY-SA 4.0
2023-03-22T19:59:12.407Z
As it’s currently written, your answer is unclear. Please [edit] to add additional details that will help others understand how this addresses the question asked. You can find more information on how to write good answers [in the help center](/help/how-to-answer).
Community
CC BY-SA 4.0
2023-03-12T18:53:07.340Z
2023-03-12T18:53:07.340Z
MPK
<p>The reason why it boosts supply is that the costs are not born by produces. For example, since you can’t own fresh air due to lack of property rights (tragedy of the commons) firms don’t need to pay for using up the clean air by pollution and hence it does not enter their cost functions.</p>

<p>Recall decrease in costs shifts supply right as at lower cost firms are willing to supply more at any price. </p>

<p>I created a graphical example of this for you in overleaf. As the graph show in presence of externality the supply <span class="math-container">$S$</span> shifts right and new supply is <span class="math-container">$S_E$</span>. Demand remains unchanged because the externality affects production costs not preferences or other factors affecting demand. The new equilibrium will be at the intersection of <span class="math-container">$D$</span> and <span class="math-container">$S_E$</span>. In this new equilibrium price is too low and quantity too high compared to social optimum which would be at the intersection of demand and supply without the externality.</p>

<p>The vertical distance between the supplies is the value of the external costs (externality).</p>

<p><a href="https://i.sstatic.net/jgGeP.jpg" rel="noreferrer"><img src="https://i.sstatic.net/jgGeP.jpg" alt=""></a></p>

CC BY-SA 4.0
2019-11-28T02:26:43.910Z
Thanks for the effort you put into this answer! You answered my question perfectly.
Scene
CC BY-SA 4.0
2019-11-28T01:27:35.117Z
2019-11-28T01:43:17.547Z
2019-11-28T01:43:17.547Z
1muflon1
<p>I've read that the tragedy of the commons can be seen as a negative externality. That is, <span class="math-container">$MSC &gt; MPC$</span>. However, I'm having trouble understanding why the supply curve actually shifts downwards due to this.</p>

<p>I know, graphically, that the <span class="math-container">$MSC$</span> curve will be above the <span class="math-container">$MPC$</span> curve. But, what do the external costs mean in this context and how would it all look graphically? </p>

<externalities><commons>
Relationship between the Tragedy of the Commons and negative externalities?
Scene
# Relationship between the Tragedy of the Commons and negative externalities?

(Asked by: username_0 on 2019-11-28)

I've read that the tragedy of the commons can be seen as a negative externality. That is, $MSC > MPC$. However, I'm having trouble understanding why the supply curve actually shifts downwards due to this.

I know, graphically, that the $MSC$ curve will be above the $MPC$ curve. But, what do the external costs mean in this context and how would it all look graphically?

**Tags:** externalities, commons


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## 2 answers

### Answer by username_3 on 2019-11-28. Score: 5 | Accepted answer

The reason why it boosts supply is that the costs are not born by produces. For example, since you can’t own fresh air due to lack of property rights (tragedy of the commons) firms don’t need to pay for using up the clean air by pollution and hence it does not enter their cost functions.

Recall decrease in costs shifts supply right as at lower cost firms are willing to supply more at any price.

I created a graphical example of this for you in overleaf. As the graph show in presence of externality the supply $S$ shifts right and new supply is $S\_E$. Demand remains unchanged because the externality affects production costs not preferences or other factors affecting demand. The new equilibrium will be at the intersection of $D$ and $S\_E$. In this new equilibrium price is too low and quantity too high compared to social optimum which would be at the intersection of demand and supply without the externality.

The vertical distance between the supplies is the value of the external costs (externality).

[![](https://i.sstatic.net/jgGeP.jpg)](https://i.sstatic.net/jgGeP.jpg)

> **Comments:**
> **username_0**: Thanks for the effort you put into this answer! You answered my question perfectly.  

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### Answer by username_1 on 2023-03-12. Score: 0

The S and SE curves appear the wrong way round. The free mkt outcome is over-fishing, the optimal soln. is less than free mkt.

> **Comments:**
> **username_2**: As it’s currently written, your answer is unclear. Please [edit] to add additional details that will help others understand how this addresses the question asked. You can find more information on how to write good answers [in the help center](/help/how-to-answer).  

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