Unformatted text preview: In your graph, clearly indicate the marginal private costs (MPC), marginal private benefit (MPB), and the marginal social benefit (MSB). Show an area of deadweight loss associated with the market equilibrium. What is the Pigovian solution? 3. What are the solutions available to the government to deal with an externality? Discuss their merits and shortcomings. 4. Coase offers a different approach to dealing with an externality. Give Coase Theorem. Give an example of how it could be applied. 5. Show how tradable permits can lead to the same level of abatement at a lower total cost....
View Full Document
- Winter '08
- Externalities, Market failure, Externality, Marginal private benefit, Coase, marginal private costs, properly labeled graph