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1、Externalities©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.1ExternalitiesGovernmentactioncansome
2、timesimproveuponmarketoutcomesWhymarketssometimesfailtoallocateresourcesefficientlyHowgovernmentpoliciescanpotentiallyimprovethemarket’sallocationWhatkindsofpoliciesarelikelytoworkbest©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeor
3、inpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.2ExternalitiesExternalityTheuncompensatedimpactofoneperson’sactionsonthewell-beingofabystanderMarketfailureNegativeexternalityImpacton
4、thebystanderisadversePositiveexternalityImpactonthebystanderisbeneficial©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedw
5、ebsiteforclassroomuse.3ExternalitiesNegativeexternalitiesExhaustfromautomobilesBarkingdogsPositiveexternalitiesRestoredhistoricbuildingsResearchintonewtechnologies©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseas
6、permittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.4ExternalitiesandMarketInefficiencyWelfareeconomics:arecapDemandcurve:valuetoconsumersPricestheyarewillingtopaySupplycurve:costtosuppliersEquilibriumquanti
7、tyandpriceEfficientMaximizesthesumofproducerandconsumersurplus©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforc
8、lassroomuse.5Figure16©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuse
