BCOR 3010 Class #10 - Market Failures Continued, Nonmarket Failures (1)

BCOR 3010 Class #10 - Market Failures Continued, Nonmarket Failures (1)

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Click to edit Master subtitle style BCOR 3010 Class #10: Market Failures/Nonmarket Failures
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Today’s Business Market Failures - Rhetorical or Real? Nonmarket Failures - Is the Solution More Painful than the Problem?
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Today’s Business Market Failures - Rhetorical or Real?
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Zerbe and McCurdy: “The End of Market Failure:”Transaction Costs Suppose that one party suffers from the effects of pollution from a neighboring source. The pollution damage is $125,000 and the costs of installing devices to eliminate that pollution is $100,000 . By how much is pollution overproduced? What is the net gain? Should the project be undertaken?
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The pollution damage is $125,000 and the costs of installing devices to eliminate that pollution is $100,000 . By how much is pollution overproduced? According to Zerbe and McCurdy, it would appear that $25,000 worth of pollution is overproduced.
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What is the net gain? You don’t know unless you know how much it costs effectively to “launch and enforce” the abatement process (law suits, negotiations with parties, etc.).
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