1
What is an externality?
A cost or benefit to those not directly involved in the activity
Do firms take externalities into account?
Nope
What is the Coase Theorem?
Under certain conditions, private bargaining will result in an efficient solution to externality problems.
If the benefits are greater than the costs, then there are some transactions that can make people better off without making anyone worse off.
What are a firms two types of costs?
Explicit costs (accounting costs)
Implicit costs (opportunity costs)
Which externality benefits others?
Positive externalities
What do firms produce too much of?
What are the conditions of the Coase Theorem?
Well-defined property rights
Low negotiation costs
Name another econ tutor
Jaleesa, Aristoteles
How does the government get involved in positive externalities?
Positive Incentives
Regulations
What do firms not make enough of?
Goods/services with positive externalities
What are the problems with the Coase Theorem?
Poorly-defined property rights
High negotiation costs
Free-rider problem
Tragedy of the commons
What is the solution to the free rider problem?
The government takes over production.
How does the government bring production to the socially optimum amount?
Negative Incentives (Corrective Taxes)
Regulations
Cap and Trade
Graph the private vs social costs of production
probably
What are the characteristics of a public good?
Non-rival, non-exclusionary
What is my last name
Bogarin Ulloa
What is internalizing the externality?
Forcing a firm to bear the cost of its negative externalities
Graph the marginal social benefits and costs of increasing pollution controls
yerrrr
What is the free rider problem?
People don't pay, but still benefit, and the market cannot produce it.
Who represents Fresno in Congress
Jim Costa, Vince Fong