DAY 2 PP Public Goods(1).ppt

DAY 2 PP Public Goods(1).ppt - Draw an example of a market...

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Draw an example of a market with a negative externality. Indicate the market price and quantity (P MKT and Q MKT ), the socially optimal price and quantity (P OPT and Q OPT ), and the area of deadweight loss. Describe a Pigouvian tax and how it solves the problem of deadweight loss.
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P, MSC of livestock Quantity of livestock Q MKT P MKT D S P OPT P MSC Q OPT MSC of livestock
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Chapter 18: Public Goods and Common Resources (pages 460-473)
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Excludable = only I get to use it Rival = once I have it you can’t EXAMPLE : Car dealerships
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  • Fall '16
  • Market failure, Economics terminology, Externality, Pigovian tax, Draw

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