March 29th _ 31 - Econ 100A Microeconomics Professor Sarah...

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Econ 100A – Microeconomics Professor Sarah Reynolds Department of Economics University of California, Berkeley Textbook by Thomas Nechyba Externalities in Competitive Markets Chapter 21 - March 29 th , 2011 Externalities – Positive Negative Determining the inefficiency of an externality Production Externality (Negative) Consumption Externality (Positive) Resolving the externality with a Pigouvian Tax/Subsidy
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Other alternatives for resolving the Pollution Problem: Cap & Trade Pollution Tax The Tragedy of the Commons – social losses that occur when resources are “commonly” rather than privately owned. Solution: Establish Markets (by establishing property rights)
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Coase Theorem The benefit I get from sleeping at night is $100. The benefit my noisy neighbors get from having a party is $500 Silent rights to me: Noise rights to neighbors: The benefit I get from having a view of the bay is $1,000 The benefit my neighbor gets from having a large & leafy tree in his yard is $500 It costs us $250 to draw up a contract. View rights to me:
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This note was uploaded on 09/11/2011 for the course ECON 100A taught by Professor Woroch during the Spring '08 term at University of California, Berkeley.

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March 29th _ 31 - Econ 100A Microeconomics Professor Sarah...

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