10-23 Class notes- Externalities and Property Rights

10-23 Class notes- Externalities and Property Rights - of...

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Review Externalities and Property Rights - Externalities are the costs (and sometimes benefits) that are not experienced directly by producers and consumers of goods. o Externalities “spill over” onto third parties. Externalities interfere with the efficient allocation of resources o For most goods, the total social cost of production and consumption are reflected in the price of the good. o When negative externalities are associated with production or consumption of a good, TOO MUCH
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Unformatted text preview: of the good is produced and consumed. o When positive externalities are associated with production or consumption of a good, TOO LITTLE of the good is produced or consumed. Externalities persist in situations where property right are either poorly defined or have not been secured. Economics Contributes to Efficient Remedies for Third Party Effects EPA- establishes the Acid-rain abatement program that authorized the creation of a sulfur dioxide allowance trading system....
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