Chapter 18 Externalities and Public Goods Chapter Outline ▣Externalities Ways of Correcting Market Failure Externalities and Property Rights Common Property Resources ▣Public Goods Private Preferences for Public Goods
Chapter 18 Externalities and Public Goods Chapter Outline ❑ Externalities ❑ Ways of Correcting Market Failure ❑ Externalities and Property Rights ❑ Common Property Resources ❑ Public Goods ❑ Private Preferences for Public Goods
18.1 Externality Externality-Action taken by either a producer or a consumer which affects other producers or consumers but is not accounted for by the market price. Externalities can arise between producers,between customers, or between consumers and producers. They can be negative-when the action of one party imposes costs -or positive-when the action of one party benefits another party
18.1 Externality Externality-Action taken by either a producer or a consumer which affects other producers or consumers but is not accounted for by the market price. Externalities can arise between producers, between customers, or between consumers and producers. They can be negative- when the action of one party imposes costs —or positive– when the action of one party benefits another party
A negative externality occurs,for example,when a steel plant dumps its waste in a river that fishermen downstream depend on for their daily catch.The more waste the steel plant dumps in the river,the fewer fish will be supported
A negative externality occurs, for example, when a steel plant dumps its waste in a river that fishermen downstream depend on for their daily catch. The more waste the steel plant dumps in the river, the fewer fish will be supported
The firm,however,has no incentive to account for() the external costs that it imposes on fishermen when making its production decision. Furthermore,there is no market in which these external costs can be transmitted into the price of steel
The firm, however, has no incentive to account for(考虑) the external costs that it imposes on fishermen when making its production decision. Furthermore, there is no market in which these external costs can be transmitted into the price of steel
A positive externality occurs when a home owner repaints her house and plants (an attractive garden. ▣All the neighbors benefit from(受益于)this activity,yet the home owner's decision to repaint and landscape(从事自然美化工作) probably did not take these benefits into account,because his neighbors would not pay for the benefit ()
A positive externality occurs when a home owner repaints her house and plants (建立) an attractive garden. All the neighbors benefit from (受益于) this activity, yet the home owner’s decision to repaint and landscape(从事自然美化工作) probably did not take these benefits into account, because his neighbors would not pay for the benefit (好处)