ECO 11 - 5 JAN - Lecture 11 ECO 100Y5Y 5 January 2009 A....

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Lecture 11 5 January 2009 ECO 100Y5Y A. Cohen E C O N O M I C S PARKIN BADE Lecture 11 5 January 2009 E C O N O M I C S PARKIN BADE Chapter 15 Externalities Externalities in Our Lives Externality — cost or benefit from economic activity affecting people not part of original activity negative externality — imposes external cost neg. production externality (pollution) neg. consumption externality (tobacco smoke) positive externality — provides external benefit positive production externality (bee pollination) positive consumption externality (flu shot) continued
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Lecture 11 5 January 2009 ECO 100Y5Y A. Cohen Public good – can be consumed simultaneously by everyone; no one can be excluded free rider problem (extreme case of positive externality) “The third … duty of the … commonwealth is that erecting those public institutions and those public works, which, though they may be in the highest degree advantageous to a great society, are , however, of such a nature that the profit could
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ECO 11 - 5 JAN - Lecture 11 ECO 100Y5Y 5 January 2009 A....

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