1 / 4

Analysis of a Negative Externality

Analysis of a Negative Externality. The market for gasoline. P. $. 5. 4. 3. 2. 1. 0. Q (gallons). 0. 10. 20. 30. Social cost. S. D. 25. P. 50. $. 40. 30. 20. 10. Q. 0. 0. 10. 20. 30. A C T I V E L E A R N I N G 1 Analysis of a positive externality.

yadid
Download Presentation

Analysis of a Negative Externality

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Analysis of a Negative Externality The market for gasoline P $ 5 4 3 2 1 0 Q(gallons) 0 10 20 30 Social cost S D 25 EXTERNALITIES

  2. P 50 $ 40 30 20 10 Q 0 0 10 20 30 A C T I V E L E A R N I N G 1Analysis of a positive externality The market for flu shots External benefit = $10/shot • Draw the social value curve. • Find the socially optimal Q. • What policy would internalize this externality? S D 1

  3. A C T I V E L E A R N I N G 2Applying Coase Collectively, the 1000 residents of Green Valley value swimming in Blue Lake at $100,000. A nearby factory pollutes the lake water, and would have to pay $50,000 for non-polluting equipment. A. Describe a Coase-like private solution. B. Can you think of any reasons why this solution might not work in the real world? 2

  4. A C T I V E L E A R N I N G 2Explaining wage differentials In each case, identify which worker would earn more and explain why. A.The best physical therapist on the planet or the best writer on the planet B.A trucker that hauls produce or a trucker that hauls hazardous waste from nuclear power plants C.A graduate of an Ivy League college or an equally intelligent & capable graduate of a state university D.Someone who graduated from a state university with a 3.7 GPA, or someone who graduated from the same university with a 2.4 GPA 3

More Related