Chapter5 - Chapter Chapter 5 Externalities 1 An externality arises when production or consumption of An externality arises when production or

Chapter5 - Chapter Chapter 5 Externalities 1 An externality...

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Chapter 5 li i Externalities 1
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An externality arises when production or consumption of a An externality arises when production or consumption of a good imposes costs or produces benefits to third parties- people not directly involved in the production or consumption of the good of the good. Definition: If the actions of a consumer/producer imposes costs on third parties, the consumer/producer creates a negative externality (or external cost) . Definition: If the actions of a consumer/producer produces benefits for third parties, the consumer/producer creates a positive externality (or external benefit) positive externality (or external benefit). 2 出现 强加 包含 涉及
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An example of a negative production-side externality is the costs imposed on third parties from pollution the costs imposed on third parties from pollution emitted from a factory’s smokestack. An example of a positive consumption-side externality is the benefits to third parties from a person receiving vaccination against a disease. 3 排放
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Production-side externalities drive a wedge between marginal social cost (MSC) and marginal private cost marginal social cost (MSC) and marginal private cost (MPC), and consumption-side externalities drive a wedge between marginal social benefit (MSB) and marginal private benefit (MPB). The textbook equivalently labels these as SMC, PMC, SMB and PMB. 4 楔形物
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With a negative production-side externality, MSC MPC MEC = + where MEC is the incremental external cost of producing one more unit of output (the textbook equivalently calls this marginal damage, MD). 5 增加的
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A Negative Production-Side Externality $ MSC MEC is constant per unit of output. MPC MEC Q 6
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A Negative Production-Side Externality $ MSC MEC increases per MPC MEC increases per unit of output. MEC Q 7
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