Chap011.5 - Externalities is Not Zero Quantity of Pollution...

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5 Chapter 11: Externalities and Property Rights Slide 25 External Costs and Benefits ± Legal Remedies for Externalities z When negotiation is not costless: ² Laws may be used to correct for externalities. ² The burden of the law can be placed on those who have the lowest cost. Chapter 11: Externalities and Property Rights Slide 26 External Costs and Benefits ± Economic Naturalist z Why do many governments enact laws that limit the discharge of environmental pollutants? Chapter 11: Externalities and Property Rights Slide 27 External Costs and Benefits ± Economic Naturalist z Why does government subsidize the planting of trees on hillsides? Chapter 11: Externalities and Property Rights Slide 28 The Optimal Amount of Negative
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Unformatted text preview: Externalities is Not Zero Quantity of Pollution MC/MB MC (increasing opportunity cost) Q MB = MB MB (diminishing marginal utility) Optimal amount of pollution: MC = MB Chapter 11: Externalities and Property Rights Slide 29 ± The Problem of Unpriced Resources z When no one owns property (the commons), the opportunity cost of using it is not considered. z Use of the property (the commons) will increase until MB = 0. Property Rights and the Tragedy of Commons Chapter 11: Externalities and Property Rights Slide 30 Property Rights and the Tragedy of Commons ± One person’s use of the commons imposes an external cost on the others by making the property less valuable....
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