外部性与公共物品

(12.5% decrease).
ADE < ABC
Marginal Cost of Abatement
2 4 6 8 10 12 14 16 Level of Emissions Slide 20
Ways of Correcting Market Failure
Summary: Fees vs. Standards
Advantages of Fees
When equal standards must be used, fees achieve the same emission abatement at lower cost.
Fees create an incentive to install equipment that would reduce emissions further.
Chapter 1
Slide 8
Externalities
Positive Externalities and Inefficiency
Externalities can also result in too little production, as can be shown in an example of home repair and landscaping.
MSCI
P1 q* q1
The industry competitive output is Q1 while the efficient
level is Q*.
P*
P1
MEC
Firm output
Q* Q1
S = MCI
Aggregate social cost of
negative externality
MSB are higher than marginal benefits D.
A self-interested home owner invests q1 in repairs. The efficient level of repairs
q* is higher. The higher price P1 discourages repair.
Standards are preferred when MSC is steep and MCA is flat.
not reduced.
Chapter 1
Total Fee
Total
of AbatementE* Abatement Cost
12
MCA
Level of Emissions
Slide 16
Ways of Correcting Market Failure
Standards Versus Fees
is illustrated. Not efficient because
MCA2 < MCA1.
If a fee of $3 was imposed Firm 1 emissions would fall by 6 to 8. Firm 2 emissions
would fall by 8 to 6. MCA1 = MCA2: efficient solution.
Marginal Social Cost (MSC) is MC plus MEC.
Chapter 1
Slide 6
External Costs
Price
When there are negative externalities, the marginal social cost MSC is higher
Chapter 1
Slide 11
The Efficient Level of Emissions
Dollars per unit of Emissions
Assume: 1) Competitive market 2) Output and emissions decisions are independent
Chapter 18
Externalities and Public Goods
Topics to be Discussed
Externalities Ways of Correcting Market Failure Externalities and Property Rights Common Property Resources
Dollars per unit of Emissions
MSC
Standard
Fee
3
Chapter 1
E* 12
MCA
Level of Emissions
Slide 14
Ways of Correcting Market Failure
Options for Reducing Emissions to E*
Fixed-proportion production technology
Must reduce output to reduce emissions
Use an output tax to reduce output
Input substitution possible by altering technology
Enforced by monetary and criminal penalties
Increases the cost of production and the threshold price to enter the industry
Chapter 1
Slide 13
Standards and Fees
than the marginal cost.
The differences is the marginal external
cost MEC.
MSC
Price
MC
The profit maximizing firm produces at q1 while the efficient output level is q*.
Assumptions Policymakers have asymmetric information Administrative costs require the same fee or standard for all firms
Chapter 1
Slide 17
The Case for Fees
Chapter 1
Slide 9
External Benefits
Value MSB
D P1 P*
MEB
When there are positive externalities (the benefits of repairs to neighbors), marginal social benefits
Positive
Action by one party benefits another party
Chapter 1
Slide 4
External Cost
Scenario
Steel plant dumping waste in a river The entire steel market effluent can be
3) Profit maximizing output chosen
MSC
6
Why is this more efficient than zero emissions?
At Eo the marginal cost of abating emissions
is greater than the
marginal social cost.
(12.5% reduction).
Emission increases to 11.
ABC is the increase in social cost less the decrease in abatement
cost.
B
Based on incomplete
information standard is 9
MECI
D
Industry output
External Cost
Negative Externalities encourage inefficient firms to remain in the industry and create excessive production in the long run.
reduced by lowering output (fixed proportions production function)
Chapter 1
Slide 5
External Cost
Scenario
Marginal External Cost (MEC) is the cost imposed on fishermen downstream for each level of production.
4
At E1 the marginal social cost is greater
than the marginal benefit.
The efficient level of
2
emissions is 12 (E*) where
MCA = MSC.
MCA
E0
E*
E1
0 2 4 6 8 10 12 14 16 18 20 22 24 26
Chapter 1
Slide 2
Topics to be Discussed
Public Goods Private Preferences for Public Goods