Econ 4-11-2011 - Econ4112011 14:28

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Econ 4-11-2011 14:28 We have implicitly assumed all costs and benefits are private Hiring labor, etc. Some costs of production could affect others in society: pollution Our basic assumption: private entities/markets compare MPC and MPB Firms maximize own profits How can we fix this? When we first analyze taxes on suppliers, what did we do?  Shift S up If we want to get back societal efficiency, we can tax so that MPC=MSC  reducing output to Qopt Positive vs. Negative Externality There can be positive externalities o Vaccination (using Picture 2): I benefit because I get less sick but society 
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Econ 4-11-2011 - Econ4112011 14:28

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