外部性与公共物品
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Chapter 18
Externalities and Public Goods
Topics to be Discussed
Externalities Ways of Correcting Market Failure Externalities and Property Rights Common Property Resources
Fixed-proportion production technology
Must reduce output to reduce emissions
Use an output tax to reduce output
Input substitution possible by altering technology
MC
Is research and development discouraged by positive externalities?
Chapter 18
q1 q*
Repair Level
Slide 10
Ways of Correcting Market Failure
Assumption: The market failure is pollution
Marginal Social Cost (MSC) is MC plus MEC.
Chapter 18
Slide 6
External Costs
Price
When there are negative externalities, the marginal social cost MSC is higher
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.
Chapter 18
Slide 9
External Benefits
Value MSB
D P1 P*
MEB
When there are positive externalities (the benefits of repairs to neighbors), marginal social benefits
3) Profit maximizing output chosen
MSC
6
Why is this more efficient than zero emissions?
At Eo the marginal cost of abating emissions
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 extபைடு நூலகம்rnality
Positive
Action by one party benefits another party
Chapter 18
Slide 4
External Cost
Scenario
Steel plant dumping waste in a river The entire steel market effluent can be
Chapter 18
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
Slide 2
Topics to be Discussed
Public Goods Private Preferences for Public Goods
Chapter 18
Slide 3
Externalities
Negative
Action by one party imposes a cost on another party
MECI
D
Industry output
External Cost
Negative Externalities encourage inefficient firms to remain in the industry and create excessive production in the long run.
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*.
reduced by lowering output (fixed proportions production function)
Chapter 18
Slide 5
External Cost
Scenario
Marginal External Cost (MEC) is the cost imposed on fishermen downstream for each level of production.
Chapter 18
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.
Externalities and Public Goods
Topics to be Discussed
Externalities Ways of Correcting Market Failure Externalities and Property Rights Common Property Resources
Fixed-proportion production technology
Must reduce output to reduce emissions
Use an output tax to reduce output
Input substitution possible by altering technology
MC
Is research and development discouraged by positive externalities?
Chapter 18
q1 q*
Repair Level
Slide 10
Ways of Correcting Market Failure
Assumption: The market failure is pollution
Marginal Social Cost (MSC) is MC plus MEC.
Chapter 18
Slide 6
External Costs
Price
When there are negative externalities, the marginal social cost MSC is higher
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.
Chapter 18
Slide 9
External Benefits
Value MSB
D P1 P*
MEB
When there are positive externalities (the benefits of repairs to neighbors), marginal social benefits
3) Profit maximizing output chosen
MSC
6
Why is this more efficient than zero emissions?
At Eo the marginal cost of abating emissions
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 extபைடு நூலகம்rnality
Positive
Action by one party benefits another party
Chapter 18
Slide 4
External Cost
Scenario
Steel plant dumping waste in a river The entire steel market effluent can be
Chapter 18
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
Slide 2
Topics to be Discussed
Public Goods Private Preferences for Public Goods
Chapter 18
Slide 3
Externalities
Negative
Action by one party imposes a cost on another party
MECI
D
Industry output
External Cost
Negative Externalities encourage inefficient firms to remain in the industry and create excessive production in the long run.
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*.
reduced by lowering output (fixed proportions production function)
Chapter 18
Slide 5
External Cost
Scenario
Marginal External Cost (MEC) is the cost imposed on fishermen downstream for each level of production.
Chapter 18
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.