Lec_14_uncertainty

# Lec_14_uncertainty - Chapter 11 Externalities and Property...

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1 Problem set 3: due Feb 9-13 From the problems at the end of Chapter 10 ("Games and Strategic Behavior"), pages 290-201: problems 1 and 2 From the problems at the end of Chapter 11 ("Externalities and Property Rights"), pages 320-322: problems 3, 4, 8, and 9 Chapter 11: Externalities and Property Rights A. External costs B. External benefits C. Dealing with externalities D. The tragedy of the commons 1. Outcome when land is privately owned 2. Outcome when land is publicly owned . 600 0 3000 500 6 \$3.00/lb. 600 200 3000 600 5 \$1.33/lb. 600 400 2800 700 4 \$1.00/lb. 600 600 2400 800 3 75¢/lb. 600 800 1800 900 2 60¢/lb. 600 1000 1000 1000 1 MC= ± TC/ ± Q ± TC ± Q Total pounds weight/ cow # of cows . 600 0 3000 500 6 \$3.00/lb. 600 200 3000 600 5 \$1.33/lb. 600 400 2800 700 4 \$1.00/lb. 600 600 2400 800 3 75¢/lb. 600 800 1800 900 2 60¢/lb. 600 1000 1000 1000 1 MC= ± TC/ ± Q ± TC ± Q Total pounds weight/ cow # of cows If land is privately owned, outcome would be MR (=\$1.00/lb) is equal to social MC . 600 0 3000 500 6 \$3.00/lb. 600 200 3000 600 5 \$1.33/lb. 600 400 2800 700 4 \$1.00/lb. 600 600 2400 800 3 75¢/lb. 600 800 1800 900 2 60¢/lb. 600 1000 1000 1000 1 MC= ± TC/ ± Q ± TC ± Q Total pounds weight/ cow # of cows If land is privately owned, outcome would be MR (=\$1.00/lb) is equal to social MC If land is publicly owned, outcome would be MR (=\$1.00/lb) is equal to private MC Tragedy of commons: If resource is not privately owned, it will be inefficiently overused. Lack of private property rights makes poor countries even poorer

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2 When land becomes too overgrazed to support cows, people add goats Goats in Ethiopia Nobody owns the fish in the sea If I catch more fish with my little fishing boat … there will be fewer fish left to replenish future stocks Effect on my own future yield may be small But combined effect on all the other fishing boats may add up Commercial Marine Fisheries Catch Decade 1950s 1960s 1970s 1980s 1990s
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