H09CorrectingExternalities

H09CorrectingExternalities - 34 Externality total cost of...

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1 Total Cost of Pollution to Society Externality Externality total cost of pollution to society cost of pollution abatement to firms higher if pollution is lower Pollution Cost ($) Private Total Cost of Pollution Abatement Total Social Damage of Pollution cost of damage to society lower if pollution is lower 34 Total Cost of Pollution to Society Pollution Cost ($) Private Total Cost of Pollution Abatement Total Social Damage of Pollution Externality Externality best for society minimizes costs QP* firms would choose a higher level of pollution where cost of abatement is 0 QP C firms would choose too much pollution 34 Externality Externality analyze with marginal cost and marginal benefit Pollution ($) Marginal Cost of Abatement marginal benefit of abatement (MBA) damage society avoids from unit of pollution lower if pollution is lower Marginal Benefit of Abatement marginal cost of abatement (MCA) firms’ extra cost of abating a unit of pollution higher if pollution is lower 34
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H09CorrectingExternalities - 34 Externality total cost of...

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