《微观经济学》课程教学资源（PPT课件讲义）第18章 外部性与公共物品

Chapter 18 Externalities and Public Goods

Chapter 18 Externalities and Public Goods

Topics to be Discussed ■ Externalities a Ways of Correcting Market Failure a EXternalities and Property Rights a Common Property Resources Chapter 18 Slide 2

Chapter 18 Slide 2 Topics to be Discussed ◼ Externalities ◼ Ways of Correcting Market Failure ◼ Externalities and Property Rights ◼ Common Property Resources

Topics to be Discussed ■ Public goods a Private Preferences for public goods Chapter 18 Slide 3

Chapter 18 Slide 3 Topics to be Discussed ◼ Public Goods ◼ Private Preferences for Public Goods

Externalities ■ Negative Action by one party imposes a cost on another party ■ Positive o Action by one party benefits another party Chapter 18 Slide 4

Chapter 18 Slide 4 Externalities ◼ Negative ⚫ Action by one party imposes a cost on another party ◼ Positive ⚫ Action by one party benefits another party

External Cost ■ Scenario Steel plant dumping waste in a river o The entire steel market effluent can be reduced by lowering output(fixed proportions production function) Chapter 18 Slide 5

Chapter 18 Slide 5 External Cost ◼ Scenario ⚫ Steel plant dumping waste in a river ⚫ The entire steel market effluent can be reduced by lowering output (fixed proportions production function)

External Cost ■ Scenario Marginal External Cost(MEC)is the cost imposed on fishermen downstream for each level of production o Marginal Social Cost (MSC)is MC plus MEC Chapter 18 Slide 6

Chapter 18 Slide 6 External Cost ◼ Scenario ⚫ Marginal External Cost (MEC) is the cost imposed on fishermen downstream for each level of production. ⚫ Marginal Social Cost (MSC) is MC plus MEC

External Costs When there are negative The differences is The profit maximizing firm externalities, the marginal the marginal external produces at q1 while the social cost MSC is higher cost MEC efficient output level is ql than the marginal cost Price MSC Price MC MSC S=MC The industry competitive output is Q1 while the efficient level is Q Aggregate social cost off negative externality MEC MEC D g 91 Firm output Q* Q1 Industry output

MC S = MCI D P1 Aggregate social cost of negative externality P1 q1 Q1 MSC MSCI When there are negative externalities, the marginal social cost MSC is higher than the marginal cost. External Costs Firm output Price Industry output Price MEC MECI The differences is the marginal external cost MEC. q* P* Q* The industry competitive output is Q1 while the efficient level is Q*. The profit maximizing firm produces at q1 while the efficient output level is q*

External Cost Negative Externalities encourage inefficient firms to remain in the industry and create excessive production in the long run Chapter 18 Slide 8

Chapter 18 Slide 8 External Cost ◼ Negative Externalities encourage inefficient firms to remain in the industry and create excessive production in the long run

Externalities a Positive EXternalities and Inefficiency Externalities can also result in too little production, as can be shown in an example of home repair and landscaping Chapter 18 Slide 9

Chapter 18 Slide 9 Externalities ◼ Positive Externalities and Inefficiency ⚫ Externalities can also result in too little production, as can be shown in an example of home repair and landscaping

External Benefits Value I MSB When there are positive externalities(the benefits of repairs to neighbors), marginal social benefits A self-interested home owner MSB are higher that invests q, in repairs. The marginal benefits D efficient level of repairs g* is higher. The higher price P discourages repair. P1 MC Is research and development MEB discouraged by positive externalities Repair Level Chapter 18 Slide 10

Chapter 18 Slide 10 P1 MC External Benefits Repair Level Value D Is research and development discouraged by positive externalities? q1 MSB MEB When there are positive externalities (the benefits of repairs to neighbors), marginal social benefits MSB are higher than marginal benefits D. q* P* A self-interested home owner invests q1 in repairs. The efficient level of repairs q* is higher. The higher price P1 discourages repair