微观经济学讲义PPT11

Abercrombie can pay Fitch up to $50 per day for the right to pollute Fitch will accept any offer over $30 per day In this scenario, polluting is the right thing to do
$200 / day
$180 / day
Abercrombie does not install the filter Marginal cost of filter to Abercrombie is $30 per day The marginal benefit to Fitch is $50 per day There is a net welfare loss of $20 per day
LO 11 - 1
11-3
Externalities Affect Resource Allocation
Externalities reduce economic efficiency Solutions to externalities may be efficient When efficient solutions to externalities are not possible, government intervention or other collective action may be used
LO 11 - 1
QPVT Quantity
QSOC
Social Optimum
11-8
Effects of Externalities
With externalities, private market outcomes do not achieve the largest possible economic surplus
When external costs exist, maximizing private profits produces more than the social optimum
LO 11 - 1 11-6
External Costs
No External Cost
Price ($000s / ton)
LO 11 - 1
11-4
Honeybee Keeper – Scenario 1
Phoebe harvests and sells honey from her bees Bees pollinate the apple orchards No payments made to Phoebe The bees provide a free service to the local farmers Phoebe is giving away a service Private costs are equal to private benefits Social costs are less than social benefits
LO 11- All 11-2
External Costs and Benefits
External cost is a cost of an activity that is paid by people other than those who pursue the activity Also called a negative externality External benefit is a benefit of an activity received by a third party Also called a positive externality
LO 11 - 2 11-14
Abercrombie the Polluter – Scenario 3
Abercrombie’s company produces toxic waste Laws prohibit dumping the waste in the river UNLESS Fitch agrees New gains matrix
LO 11 - 2
11-10
Abercrombie the Polluter – Scenario 1
Abercrombie’s company dumps toxic waste in the river Fitch cannot fish the river No one else is harmed Abercrombie could install a filter to remove the harm to Fitch Filter imposes costs on Abercrombie Filter benefits Fitch Parties do not communicate
External Cost
Social MC
Private MC 1.3 D 12,000 Quantity (tons/year)
Price ($000s / ton)
2.3 2.0
1.3
$1,000/ton Private MC D 8,000 12,000
Quantity (tons/year) Deadweight loss from pollution = $2 M/yr Social Optimum Private Equilibrium
With Filter Abercrombie's Gains Fitch's Gains $100 / day $100 / day Without Filter $130 / day $50 / day
Total Gains
LO 11 - 2
$200 / day
$180 / day
11-13
The Coase Theorem
11-7
LO 11 - 1
Positive Externality for Consumers
Deadweight loss from positive externality
XB
MBPVT ocial Demand
Private Demand
Private Equilibrium
If people can negotiate the right to perform activities that cause externalities, they can always arrive at efficient solutions to problems caused by externalities Negotiations must be costless Sometimes those harmed pay to stop pollution The case of Abercrombie and Fitch Sometimes polluter buys the right to pollute Abercrombie pays Fitch if the value of polluting is greater than the harm to Fitch The adjustment to the externality is usually done by the party with the lowest cost
When external benefits exist, maximizing private profits produces less than the social optimum
LO 11 - 1 11-5
Honeybee Keeper – Scenario 2
Phoebe harvests and sells honey from her bees Neighboring school and nursing homes are bothered by bee stings The bees are a nuisance to the neighbors Phoebe is not paying all the costs of her honeybees Private costs are equal to private benefits Social costs are greater than social benefits
Cash is left on the table
LO 11 - 1
11-9
Remedying Externalities
With externalities, private market outcomes do not achieve the largest possible economic surplus Cash is left on the table For example, with monopolies, output is lower than with prefect competition Introduction of coupons and rebates expands the market With externalities, actions to capture the surplus are likely
LO 11 - 2 11-12
Abercrombie the Polluter – Scenario 2
Communications changes the outcome Fitch pays Abercrombie between $30 and $50 per day to use the filter Net gain in total surplus of $20 per day