Lec_10_externalities

Lec_10_externalities - Mon 4-4:50 PETER 103 Vinayak Alladi...

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1 Ayal Chen-Zion PETER 103 Fri 5-5:50 Soojin Jo PETER 103 Fri 4-4:50 Martha Gimbel PETER 103 Wed 5-5:50 Roy Allen CENTR 222 Wed 3-3:50 Matthew Louie WLH 2204 Mon 10-10:50 Vinayak Alladi PETER 103 Mon 4-4:50 (1) Discussion sections do not meet today. (2) Exams returned in discussion section beginning Friday. (3) Check course web page on Saturday for information about grading scale http://dss.ucsd.edu/~jhamilto/Econ2.html Chapter 11: Externalities and Property Rights A. External costs Definitions • The private costs of an activity are the costs that you personally pay for • The external costs of an activity are negative consequences of that activity for others that you don’t personally pay for • By negative consequence we refer to something they would be willing to pay to prevent if they could Example: driving your car Private costs: • gasoline wear on car External costs: traffic congestion • pollution But why is air pollution an “external” cost? What if I care about pollution myself?
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2 Driving 1 more mile adds 0.1 grams of hydrocarbons to the air 0.1 grams has a miniscule effect on the air of San Diego My willingness to pay to have 0.1 fewer grams HC in the air is maybe one-millionth of a cent So my personal “pollution cost” is one- millionth of a cent But, if there are 3 million people in San Diego, the external “pollution cost” of driving my car one more mile would be 3 cents
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