Professional Documents
Culture Documents
Bade PPT Ch10lect
Bade PPT Ch10lect
CHAPTER CHECKLIST
4. The efficient
quantity is 2,000
tons of chemical,
where marginal
social cost equals
marginal benefit.
5. The gray triangle
shows the dead-
weight loss created
by the pollution
externality.
10.1 NEGATIVE EXTERNALITIES: POLLUTION
Property Rights
Property rights are legally established titles to the
ownership, use, and disposal of factors of production
and goods and services that are enforceable in the
courts.
10.1 NEGATIVE EXTERNALITIES: POLLUTION
Figure 10.3 shows
how property
rights achieve an
efficient outcome.
1. With property
rights, the MC
curve that
excludes the cost
of pollution shows
only part of the
producers
marginal cost.
10.1 NEGATIVE EXTERNALITIES: POLLUTION
2. The marginal
private cost
curve includes
the cost of
pollution, and
the supply curve
is S = MC.
10.1 NEGATIVE EXTERNALITIES: POLLUTION
3. Market
equilibrium is
at a price of
$150 a ton and
a quantity of
2,000 tons of
chemical a
month and is
efficient
because
4. Marginal social
cost equals
marginal benefit.
10.1 NEGATIVE EXTERNALITIES: POLLUTION
Emission Charges
Emission charges confront the producers with the
external cost of pollution and provide an incentive to
seek technologies that are less polluting.
Marketable Permits
A marketable permit assigns to each producer in an
industry an emission limit.
Producers can buy and sell permits in the market.
Producers with a low marginal cost of reducing
pollution will sell permits and producers with a high
marginal cost of reducing pollution will buy.
Producers will buy and sell permits until their marginal
cost of pollution equals the market price of a permit.
10.1 NEGATIVE EXTERNALITIES: POLLUTION
Taxes
Figure 10.4 shows
the effects of a
pollution tax.
1. A pollution tax is
imposed that is
equal to the
marginal external
cost arising from
pollution.
10.1 NEGATIVE EXTERNALITIES: POLLUTION
2. Market equilibrium
at a price of $150 a
ton and 2,000 tons
of chemical a month
is efficient
because
3. Marginal social cost
equals marginal
benefit.
10.1 NEGATIVE EXTERNALITIES: POLLUTION
4. The government
collects tax
revenue shown by
the purple
rectangle.
10.2 POSITIVE EXTERNALITIES: KNOWLEDGE
4. The efficient
number of students
is 15 million.
3. The market
equilibrium is
efficient with 15
million students
enrolled in college.
4. Marginal social
benefit equals
marginal cost.
10.2 POSITIVE EXTERNALITIES: KNOWLEDGE
Vouchers
Figure 10.8 shows
how vouchers can
achieve an efficient
outcome.
The MSB curve
becomes the demand
curve because
1. With vouchers,
buyers are willing to
pay MB plus the
value of the voucher.
10.2 POSITIVE EXTERNALITIES: KNOWLEDGE
2. Market equilibrium is
efficient with 15
million students
enrolled.
3. Price, marginal
social benefit, and
marginal cost are
equal.
4. Tuition equals the
dollar price of
$10,000 plus the
value of the voucher.
10.2 POSITIVE EXTERNALITIES: KNOWLEDGE