5 total benefit and total cost billions of dollars 50

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Unformatted text preview: oal of bureaucracy TB 1.5 Efficient provision 0 1 2 3 4 5 Quantity (number of acid-rain checks) Two Types of Political 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 Tragedy of the Commons Lack of incentives to prevent the overuse of a commonly used resource Common Resources Sustainable Production The rate of production that can be maintained indefinitely # Boats (000s) Total Catch (000s) 0 90 160 210 240 250 240 210 160 90 0 Ave. Industry Catch (per Marginal boat) Catch (per boat) Marginal Private Marginal Social Benefit 0 90 80 70 60 50 40 30 20 10 0 Benefit 90 70 50 30 10 -10 -30 -50 -70 -90 0 1 2 3 4 5 6 7 8 9 10 Common Resources 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 constant). Overfishing Common Resources Efficie...
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