slides6 - 1. When markets fail Public goods Nonrival...

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1. When markets fail Public goods Nonrival Nonexclusive Incomplete information Monopoly Externalities
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2. Externalities Negative Action by one party imposes a cost on  another party Positive Action by one party benefits another party
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3. External Costs Firm output Price Industry output Price MC S = MC I D P 1 P 1 q 1 Q 1
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4. External Costs Firm output Price Industry output Price MC S = MC I D P 1 P 1 q 1 Q 1 MSC MSC I When there are negative externalities, the marginal social cost MSC is higher than the marginal cost.
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5. External Costs Firm output Price Industry output Price MC S = MC I D P 1 P 1 q 1 Q 1 MSC MSC I The differences is the marginal external cost MEC. MEC MEC I
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6. External Costs Firm output Price Industry output Price MC S = MC I D P 1 P 1 q 1 Q 1 MSC MSC I Efficient output occurs at Q * = MSC I = D (marginal benefit) MEC MEC I q* Q* P*
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7. The Efficient Level of Emissions Level of Emissions 2 4 6 Dollars per unit
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This note was uploaded on 08/01/2008 for the course ECG 507 taught by Professor Allen during the Fall '05 term at N.C. State.

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slides6 - 1. When markets fail Public goods Nonrival...

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