11-13-07 - 11-13-07 Econ Other 2 solution Government can...

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Unformatted text preview: 11-13-07 Econ Other 2 solution Government can impose quota to prevent people to reach social optimum. 1) Quota a. Because people only see their profit so people want to set it up. b. Establishes a maximum can be produced c. Limit production i. If not closely monitored then people will go around = k source will still be over use since MPB > MPC at the social efficient level. ii. MC is not in general equal for all users of the resource 1. Efficiency requires to give higher quotas to producers with lower MC 2) Check the graph Public Good Ex. National Defense 1) Non-excludable a good for which it is technically impossible, or very costly to excludable any individual from enjoying its benefit. Ex. National Defense, public highway, fire fighting, network TV broadcast 2) Non-rivalry to enjoyment of a food by one person does not reduce its ability to other. Suppose MSB = MSC = D ...
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