Chap011.2 - External Costs and Benefits External Costs and...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
2 Chapter 11: Externalities and Property Rights Slide 7 External Costs and Benefits ± How Externalities Affect Resource Allocation z Does the honeybee keeper face the right incentives? (Part II) ² If the hives are located near a school and nursing home, additional hives will cause more people to get stung by the bees. ² For the students and nursing home residents, the bee hives create an external cost. Chapter 11: Externalities and Property Rights Slide 8 External Costs and Benefits ± How Externalities Affect Resource Allocation z Does the honeybee keeper face the right incentives? (Part II) ² If the external costs are not considered, the optimal number of hives for the beekeeper will be greater than the socially optimal number of hives. Chapter 11: Externalities and Property Rights Slide 9 External Costs and Benefits ± How Externalities Affect Resource Allocation z When an activity does not create an externality, the optimal level of the activity for the individual will equal the socially
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/20/2012 for the course ECON 202 taught by Professor Brightwell during the Spring '08 term at Texas A&M.

Ask a homework question - tutors are online