0 billion 0 1 2 3 4 5 quantity number of acid rain

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Unformatted text preview: y (number of acid-rain checks) Efficient use of resources MB 0 1 2 3 4 5 Quantity (number of acid-rain checks) Bureaucratic Overprovision TC TC Total benefit and total cost (billions of dollars) 7.5 5.0 Goal of bureaucracy TB 3.5 1.5 0 Efficient provision 1 2 3 4 5 Quantity (number of acid-rain checks) Two Types of Political Equilibrium Equilibrium Public (Social) Interest Theory – governments make choices that achieve efficiency. • fully informed voters Public Choice Theory – governments make choices that result in inefficiency. • rationally ignorant voters (the cost of acquiring the inf. is greater than the benefit of having the info.) Common Resources Common • Tragedy of the Commons – Lack of incentives to prevent the overuse of a commonly used resource Common Resources Common •Sustainable Production –The rate of production that can be maintained indefinitely # Boats (000s) Total Catch (000s) Ave. Industry Catch (per Marginal boat) Catch (per boat) Marginal Private Marginal Social 0 1 0 90 2 3 4 5 Benefit 0 90 Benefit 90 160 210 240 250 80 70 60 50 70 50 30 10 6 7 8 240 210 160 40 30 20 -10 -30 -50 9 10 90 0 10 0 -70 -90 Common Resources Common •An Overfishing Equilibrium The average catch per boat, which is the marginal private benefit, MPB, decreases as the number of boats increases. The marginal cost per boat is MC (assumed cons...
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