9781118041581

Market Failure Due to Externalities 457 form the new curve, MTC (marginal total cost). The original supply curve embodies the in ...

from MIC, the pretax curve), and the competitive market equilibrium becomes P* $5 and Q* 8 million liters, precisely the effic ...

Market Failure Due to Externalities 459 As with most activities, the marginal cost rises with increasing levels of cleanup. (The ...

In the realistic case of imperfect information, however, externality fees have certain advantages over standards. For example, s ...

Market Failure Due to Externalities 461 via benefit-cost analysis), and this task is far from easy. Despite these difficulties, ...

the fishery has the right to clean water. Absent any other agreement, it could demand 100 percent cleanup. However, a quick chec ...

Market Failure Due to Externalities 463 A simple fact explains why international cooperation is necessary to address the problem ...

by an average 5.2 percent below 1990 levels by 2012. Developing nations pledged reductions but were not bound by specific amount ...

Market Failure Due to Externalities 465 As far as the firm is concerned, the program’s net profit is 12  15 $3 million. Thus, ...

As a practical matter, patent laws do not provide complete protection against imitation. Copycat firms frequently succeed in mak ...

Market Failure Due to Imperfect Information 467 rates can hold prices upas well as down. Critics argue that regulators are often ...

however, the second firm’s battery lasts 18 percent longer on average. If con- sumers possessed perfectinformation about the bat ...

Market Failure Due to Imperfect Information 469 with risk assessments all the time. Psychologists have questioned ordinary peo- ...

own control), man-made (rather than natural), and potentially catastrophic (rather than mundane). For these reasons, the average ...

Public Goods 471 government program is fair game for the application of the benefit-cost approach. We begin by discussing the ec ...

constructing additional miles of highway. The figure also presents demand curves for highway trips for two distinct groups: comm ...

Public Goods 473 Identifying a highway of optimal size turns on a comparison of marginal benefit and marginal cost. The key poin ...

THE BASICS OF BENEFIT-COST ANALYSIS It is best to think of benefit-cost analysis in three steps. For a given course of action, t ...

The Basics of Benefit-Cost Analysis 475 Dollar Values Critics of benefit-cost analysis point out the difficulty (and perhaps imp ...

The potential for mutually beneficial compensation exists as long as the program’s total net benefit is positive. There are myri ...