Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Negative Externalities Where the Free Market Needs Help EXTERNALITIES • An externality is the uncompensated impact of one person’s actions on another person Efficiency requires: • All costs of production must be counted by producers • If pollution is “not counted” => society bears the costs of production This is not efficient Negative Externalities – Automobile exhaust – Cigarette smoking – Barking dogs (loud pets) – Loud stereos in an apartment building – Noisy Students – Neighbor’s poorly maintained property – Pollution Positive Externalities – Restored historic buildings – Research into new technologies – Neighbor’s well maintained property Youtube video—cool examples MARKET INEFFICIENCY • Negative externalities lead markets to overproduce S2 Price of Aluminum Supply (marginal cost) Market price should be here Equilibrium Demand (marginal benefit) 0 Quantity demanded/QMARKET supplied at the true price should be here Quantity of Aluminum Specific Examples: Lake Erie Before After Regulation/Clean Up Efforts Acid Rain Global Warming Solutions to Pollution Increase Government Regulation a) Tax the pollutant oil carbon, etc. b) Fine corporations/individuals who pollute c) Provide incentive to not pollute Creating an Incentive to Not Pollute: Cap & Trade System • Gov’t can create a system of trading pollution credits [Read Article if time] Global Pollution Standards Questions to consider: 1.Who is in charge of pollution standards? 2. Should countries all have the same pollution/ environmental standards?