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 persons use of the commons imposes an external cost on the others by making the property less valuable....
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