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Module. Micro: Econ:. 39. 75. Externalities and Public Policy. KRUGMAN'S MICROECONOMICS for AP*. Margaret Ray and David Anderson. What you will learn in this Module :. How external benefits and costs cause inefficiency in markets.
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Module Micro: Econ: 39 75 Externalities and Public Policy • KRUGMAN'S • MICROECONOMICS for AP* Margaret Ray and David Anderson
What you will learnin thisModule: • How external benefits and costs cause inefficiency in markets. • Why some government policies to deal with externalities, such as emissions taxes, tradable emissions permits, and Pigouvian subsidies, are efficient, although others, including environmental standards, are not.
Policies Toward Pollution • Environmental Standards • Emissions Taxes • Tradable Emissions Permits
Production, Consumption, and Externalities • Private versus social benefits • Private versus social costs
Positive Externalities S Popt Pmkt Subsidy Pcons MSB MPB When the production and consumption of a good provides benefits to third parties, that good is said to provide positive externalities to society. Qmkt Qopt Price, MSB Qty home improvements
Negative Externalities MSC MPC Popt Tax Pmkt Pfirm D When the production and consumption of a good creates costs to third parties, that good is said to create negative externalities to society. Qopt Qmkt Price, MSC Qty electricity
Network Externalities A network externality exists when the value to an individual of a good or service depends on how many other people use the same good or service.
