ques5 - marginal cost. The market may also be able to...

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Kathy Tao Econ 101 Sect 24 Question of the Week #8 The market can be expected to achieve the proper MB=MC balance on the issue of safety because rational individuals are willing to pay extra for safety features they believe to be necessary (such as seatbelts, emergency oxygen masks, airplane maintenance checks), but no more than that (for instance, most passengers would be unwilling to pay for an extra ticket to install a safety seat for their infant, since the probability of in-air collisions is low). The marginal benefit of safety is thus equal to its
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Unformatted text preview: marginal cost. The market may also be able to achieve the proper MB=MC balance on the issue of airline flight scheduling because carriers will add as many flights to their routes as there are passengers who are willing to pay for these flights, so that the marginal benefit of adding flights is equal to the marginal cost. However, when considering the negative externality of air pollution, some degree of government regulation may be necessary to uphold the socially optimal MB=MC....
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This note was uploaded on 02/17/2009 for the course ECON 101 taught by Professor Burkhauser during the Spring '08 term at Cornell University (Engineering School).

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