When a man invests in controlling weeds and trash that tend to accumulate in his yard, both he and his neighbors benefit from his action
Is an externality associated with his private decision? If so, explain its effect, and determine whether the efficient level of weed control occurs when the individual invests in weed control.
When a man invests in weed and trash control and his neighbors benefit, but do not contribute to the effort, then too little investment will be made. The level of investment (weed and trash control) will be determined where his demand (marginal private benefit curve) intersects his marginal cost of control curve. Call this level of control q1. Since others benefit, there is a positive externality which means that the efficient level of weed and trash control q2 is above the actual level.
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