When someone owns a resource the owner is confronted

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Unformatted text preview: ns a resource, the owner is confronted with the full consequences of her/his th actions in using that resources. –The social benefits become the private benefits. th Common Common Resources – Property Rights Ri – the marginal social benefit curve, MSB, becomes the marginal becomes the marginal private benefit curve. –The resource is used resource is used efficiently because the owner of the resources is best off when MSB MSB equals MC. Common Common Resources Quotas –By assigning setting a production quota at the efficient quantity efficient quantity, a common resource might remain in common use but be used efficiently. Common Resources Common Resources •Individual Transferable Quotas –An individual transferable quota (ITQ) is a production limit that is assigned to an individual who is free to transfer the quota to someone else else. –A market emerges in ITQs. –If the efficient quantity of ITQs is assigned, the th ITQ th market price of a quota confronts resource users with marginal cost that equals MSB the with a marginal cost that equals MSB at the efficient quantity. Common Common Resources ITQs –Marginal cost rises from MC from MC0 to MC1. MC –Users of the resource make marginal private benefit, MPB, equal to marginal private cost, MC1, and the outcome is efficient....
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