Unformatted text preview: 0 Government taxes and subsidies intended to bring
about an efficient level of output in the presence of
externalities. o COMAND AND CONTROL APPROACH 0 Government imposed quantitative limits on the amount
of pollution firms are allowed to generate, or
government required installation by firms of specific
pollution control devices. Rivalry and Excludability
. RIVALRY o The situation that occurs when one person’s consuming
a unit of a good means no one else can consume it.
o The situation in which anyone who does not pay for a
good cannot consume it. Four Categories of Goods
0 PRIVATE GOODS N) o A good that is both rival and excludabie.
W0 To arrive at a demand curve for a private good, add the o5" quantities at each price.
9,6 . NATURAL MONOPOLIES J o A good that is excludable but not rival. - '-_ \
moi; . COMMON RESOURCES I‘ \ it I o A good that is rivai but not excludable.
W . PUBLIC GOODS A good that is both nonrivalrous and nonexcludable. P 0 One cannot be excluded from consuming it, whether
one pays for it or not. 0 Free Riding
a. Benefiting from a good without paying for it.
[>0 To arrive at a demand curve for a public good, add the price each consumer is willing to pay for each quantity
of the public good. Tragedy of the Commons
. The tendency for a common resource to be overused. ...
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- Spring '08