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Unformatted text preview: production efforts on other firms access to technological advance. e. Supply curve shifts downward 3. Coase Theorem- The private parties can bargain without cost over the allocation of resources, then the private market will always solve the problem of externalities and allocate resources efficiently. 4. Transaction costs- a. The costs that parties incur in the process of agreeing to and following through on a bargain b. Ex. Hiring a translator because the two private parties speak different languages 5. Corrective Tax- (pigovian tax) a. Tax designed to induce private decision makers to take account of social costs that arise from a negative externality. b. Higher the tax, larger the reduction in pollution. c. Taxes give companies incentives to develop cleaner technology d. Enhance economic efficiency...
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This note was uploaded on 09/18/2011 for the course SAS 101 taught by Professor Unsure during the Spring '11 term at Rutgers.
- Spring '11