Examples of Negative Externalities ◆ Automobile exhaust ◆ Cigarette smoking Barking dogs (loud pets) oLoud stereos in an apartment building 可可可可 Harcourt, Inc. items and derived items copyright o 2001 by Harc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. uAutomobile exhaust uCigarette smoking uBarking dogs (loud pets) uLoud stereos in an apartment building Examples of Negative Externalities
Examples of Positive Externalities ◆ Immunizations o Restored historic buildings o Research into new technologies Harcourt, Inc. items and derived items copyright O 2001 by Harcourt, Inc. tE
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. uImmunizations uRestored historic buildings uResearch into new technologies Examples of Positive Externalities
The arket for Aluminum Price of Aluminum Supply (private cost) Equilibrium Demand (private value 0 MARKET Quantity of H arc Inc items and derived items copyright C 2001 by Harcourt, Inc Aluminun
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. The Market for Aluminum... Quantity of Aluminum 0 Price of Aluminum QMARKET Demand (private value) Supply (private cost) Equilibrium
The market for Aluminum and Welfare economics The quantity produced and consumed in the market equilibrium is efficient in the sense that it maximizes the sum of producer and consumer surplus. H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. The Market for Aluminum and Welfare Economics The quantity produced and consumed in the market equilibrium is efficient in the sense that it maximizes the sum of producer and consumer surplus
The market for Aluminum and Welfare economics If the aluminum factories emit pollution(a negative externality), then the cost to society of producing aluminum is larger than the cost to aluminum producers. H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. The Market for Aluminum and Welfare Economics If the aluminum factories emit pollution (a negative externality), then the cost to society of producing aluminum is larger than the cost to aluminum producers