Inefficiency Negative Externalities Continue to suppose there is no means by which money can be exchanged for changes in smoke level What is Agent b's most preferred allocation s this allocation efficient?
Inefficiency & Negative Externalities Continue to suppose there is no means by which money can be exchanged for changes in smoke level. What is Agent B’s most preferred allocation? Is this allocation efficient?
Inefficiency Negative Externalities Smoke Bs choices Smoke mm日m Efficient allocations 0 0 A yA yB A B
Inefficiency & Negative Externalities OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB Efficient allocations B’s choices
Inefficiency negative externalities B's most Smoke preferred choice Smoke Efficient allocations 0 0 A yA yB A B
Inefficiency & Negative Externalities OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB Efficient allocations B’s most preferred choice
Inefficiency negative externalities B's most Smoke preferred choice Smoke is inefficient Efficient allocations 0 0 A yA yB A B
Inefficiency & Negative Externalities OA 1 0 Smoke mA OB 1 0 Smoke mB yA yB Efficient allocations B’s most preferred choice is inefficient
Inefficiency negative externalities So if a and b cannot trade money for changes in smoke intensity, then the outcome is inefficient Either there is too much smoke(A's most preferred choice)or there is too little smoke(B's choice)
Inefficiency & Negative Externalities So if A and B cannot trade money for changes in smoke intensity, then the outcome is inefficient. Either there is too much smoke (A’s most preferred choice) or there is too little smoke (B’s choice)