L23 - Road map 1) Consumers choice 2) Equilibrium,...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
1 L23 Externalities Road map 1) Consumers choice 2) Equilibrium, Producers (Pareto efficiency) 3) Market Failures - fixed cost: monopoly and oligopoly - externalities and public goods - asymmetric information Externalities ± So far: utilities on own actions only ± Reality: we are not islands ± An externality is a cost or a benefit imposed upon someone by actions taken by others. - benefit - positive externality . -cost- negative externality . Examples of Negative Externalities ± Air or water pollution. ± Loud parties next door. ± Traffic congestion. ± Second-hand cigarette smoke. ± Increased insurance premiums due to alcohol or tobacco consumption. ± Bad smell!
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 Examples of Positive Externalities ± A well-maintained property. ± High “human” capital ± A pleasant cologne or scent worn by the person seated next to you. ± A scientific advance. Today’s questions: ± Efficiency of interactions with externalities ± Too much or too little activity with externality?
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 06/04/2011 for the course ECON 301 taught by Professor Hansen during the Spring '08 term at Wisconsin.

Page1 / 5

L23 - Road map 1) Consumers choice 2) Equilibrium,...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online