Externalities and Common Pool/Common Access Resources + Public Goods (T3IB1)

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Description and Tags

From Course Notes Vol. 2

10 Terms

1

MSB

Marginal Social Benefit

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2

MSC

Marginal Social Cost

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3

MPB. What does the graph [look like/represent]

Marginal Private Benefit. Downward sloping/Demand curve]

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4
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5

MPC. What does the graph [look like/represent]

Marginal Private Cost. Upward sloping/Supply curve

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6

MEB

Marginal External Benefits

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7

MEC

Marginal External Cost

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8

Most government are concerned with what?

Optimizing the use of the country’s limited resources to meet unlimited human wants

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9

Market Failure

Failure of markets to achieve allocative efficiency

  • Market fail to produce output at which MSB = MSC —> Social Surplus is not maximized

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10

Free market functions based on self-interest. What are these self-interest?

  • Consumer: Aims to maximize satisfaction

  • Producer: Aims to maximize profits

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