Chapter 16 Week of April 14

Chapter 16 Week of April 14 - Summary slides Week of April...

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1 Summary slides Week of April 14 th Reading: Chapter 16 $ P 0 Q 0 5 10 15 30 25 20 12 34 5 6 7 89 1 0 Supply (MPC) Demand (MPB) P m , Q m Market Equilibrium MPB=MPC=P M $ P 0 Q 0 5 10 15 30 25 20 0 MSC MSB P E , Q E MSB=MSC=P E Social Equilibrium
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2 Market Failure • Public and Private Interests are not United –P M , Q M = P E , Q E • Some types of Market Failure – Externalities – Public Goods – Common Pool (Open Access) Goods – Imperfect Information Externality • Spillover effect associated with production or consumption that extends to a third party outside of the market. • Types of Externalities: – Positive externality (e.g., external benefits) – Negative externality (e.g., external costs) Externalities • What does this mean to provision of the good? • What does this mean to efficiency ?
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3 $ P 0 Q 0 5 10 15 30 25 20 12 34 5 6 7 89 1 0 MSC MSB P E , Q E Remember our Hybrids… Supply (MPC) Demand (MPB) Negative Externalities • Negative Externalities : –MPC < MSC – Good examples?
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Chapter 16 Week of April 14 - Summary slides Week of April...

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