ECON 548 Spring 2011 Lecture 6

# ECON 548 Spring 2011 Lecture 6 - ECON/ENVR 548 Spring 2011...

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ECON/ENVR548 Spring 2011 Lecture 6 Jason H Murray

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At Market Equilibrium

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At Optimum
Answers to our market failure example Equilibrium: CS = ½(50*10) = 250 PS = ½(50*10) = 250 Total Externality = 5*50 = 250 Net Benefits = 500-250 = 250 Optimum: CS = ½(37.5*7.5) = 140.625 PS = ½(37.5*7.5)+(37.5*(12.5-7.5)) = 140.625+ 187.5 = 328.125 Total Externality = 5*37.5 = 187.5 Net Benefits = 468.75-187.5 = 281.25

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Some lose / Some gain Equilibrium: CS = ½(50*10) = 250 PS = ½(50*10) = 250 Total Externality = 5*50 = 250 Net Benefits = 500-250 = 250 Optimum: CS = ½(37.5*7.5) = 140.625 PS = ½(37.5*7.5)+(37.5*(12.5-7.5)) = 140.625+ 187.5 = 328.125 Total Externality = 5*37.5 = 187.5 Net Benefits = 468.75-187.5 = 281.25

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Should pollution be zero? Emissions, M , have benefits and costs. What are the benefits of pollution? The output we get from making it, avoided costs of capturing or cleaning it. For example, the benefit of Carbon emissions is the energy supply. If marginal damages are increasing and
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## This note was uploaded on 06/16/2011 for the course ECON 548 taught by Professor Murray during the Spring '11 term at South Carolina.

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ECON 548 Spring 2011 Lecture 6 - ECON/ENVR 548 Spring 2011...

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