micro econ final_externialities

22 cards·by stierdaniel

What is an externiality

the uncompensated impact of one persons actions on the well-being of a bystandard.

examples of negitive externalities

air pollution from a factory, next door dorm party, 2nd hand smoke

what are private costs

the costs directly incurred by the sellers

what is a private value

the value to buyers (willingness to pay)

what plus what is a social cost

private + external cost

what is an external cost

value of the negitive impact on bystandards

exapmles of positive externalities

vaccinations, students in college that raise populations education level. repurposing nasa materials for areana roofs

what is an external benefit

the value of the positive impact on bystandards

if negtive externality.....

market quantity larger than socially desirable

if positive externality

market quantity smaller than socially desirable

market based (policies)

provide incentives so that private decision-makers will choose to solve the problem on own

regulation (policies)

affect behavior directly...ex: limits on pollution emission

corrective tax

tax designed to induce private decision makers to take account of the social costs that arise from a negative externality

ideal corrective tax

external cost

activities with positive externalities

external benefit

Efficient outcome

Firms with the lowest abatement costs reduce pollution the most

what tax is best for the enviroment

corrective taxes

private solutions

charities, moral codes, contracts

coase theorem

private parties can costlessly bargin over the allocation of resources, solve thier proble, theirselves

private outcome =.........

efficient outcome

transactional costs

the cost parties incur in the process of agreeing to and following through on a bargin

corrdination problems

if number of parties very large, corridinating my be costly to impossible