微观经济学（平狄克、鲁宾费尔德）第六版课后答案--微观经济学 英文原版ppt--ch18_pindyck

Chapter 18,Externalities and Public Goods,2005 Pearson Education, Inc.,Chapter 18,2,Topics to be Discussed,ExternalitiesWays of Correcting Market FailureExternalities and Property RightsCommon Property ResourcesPublic GoodsPrivate Preferences for Public Goods,2005 Pearson Education, Inc.,Chapter 18,3,Externalities,Externalities arise between producers, between consumers, or between producers and consumersExternalities are the effects of production and consumption activities not directly reflected in the marketThey can be negative or positive,2005 Pearson Education, Inc.,Chapter 18,4,Externalities,NegativeAction by one party imposes a cost on another partyPlant dumps waste in a river, affecting those downstreamThe firm has no incentive to account for the external costs that it imposes on those downstream,2005 Pearson Education, Inc.,Chapter 18,5,Externalities,PositiveAction by one party benefits another partyHomeowner plants a beautiful garden where all the neighbors benefit from itHomeowner did not take their benefits into account when deciding to plant,2005 Pearson Education, Inc.,Chapter 18,6,Negative Externalities and Inefficiency,Scenario plant dumping wasteMarginal External Cost (MEC) is the increase in cost imposed on fishermen downstream for each level of productionMarginal Social Cost (MSC) is MC plus MECWe can show the competitive market firm decision and the market demand and supply curves,2005 Pearson Education, Inc.,Chapter 18,7,Negative Externalities and Inefficiency,Assume the firm has a fixed proportions production function and cannot alter its input combinationsThe only way to reduce waste is to reduce outputPrice of steel and quantity of steel initially produced given by the intersection of supply and demand,2005 Pearson Education, Inc.,Chapter 18,8,Negative Externalities and Inefficiency,The MC curve for the firm is the marginal cost of productionFirm maximizes profit by producing where MC equals price in a competitive firmAs firm output increases, external costs on fishermen also increase, measured by the marginal external cost curveFrom a social point of view, the firm produces too much output,2005 Pearson Education, Inc.,Chapter 18,9,External Costs,Firm output,Price,Industry output,Price,Firm will produce q1 at P1.,There is MEC of production from the waste released. The MSC is true cost of production.,The profit maximizing firmproduces at q1 while the efficient output level is q*.,2005 Pearson Education, Inc.,Chapter 18,10,External Costs,By not producing at the efficient level, there is a social cost on society.,2005 Pearson Education, Inc.,Chapter 18,11,External Cost,Negative externalities encourage inefficient firms to remain in the industry and create excessive production in the long run,2005 Pearson Education, Inc.,Chapter 18,12,Positive Externalities and Inefficiency,Externalities can also result in too little production, as can be shown in an example of home repair and landscapingRepairs generate external benefits to the neighborsShown by the Marginal External Benefit curve (MEB)Marginal Social Benefit (MSB) curve adds MEB +D,2005 Pearson Education, Inc.,Chapter 18,13,External Benefits,Repair Level,Value,When there are positiveexternalities (the benefitsof repairs to neighbors),marginal social benefits(MSB) are higher thanmarginal benefits (D).,A self-interested home ownerinvests q1 in repairs. Theefficient level of repairsq* is higher. The higher priceP1 discourages repair.,2005 Pearson Education, Inc.,Chapter 18,14,Ways of Correcting Market Failure,Assumption: The market failure is pollutionOutput decision and emissions decision are independentFirm has chosen its profit-maximizing output levelMSC is marginal social cost of emissionsEquivalent to MEC from beforeUpward sloping because of substantially increasing harm as pollution increases,2005 Pearson Education, Inc.,Chapter 18,15,Ways of Correcting Market Failure,MCA is marginal cost of abating emissionsAdditional cost to firm of controlling pollutionDownward sloping because when emissions are high, there is little cost to controlling themLarge reductions require costly changes in production process,2005 Pearson Education, Inc.,Chapter 18,16,Ways of Correcting Market Failure,If the firm does not consider abatement, their profit maximizing level is 26 units of emissionsLevel where MCA is zeroThe socially efficient level of emissions is 12 where the MSC equals the MCA,2005 Pearson Education, Inc.,Chapter 18,17,The Efficient Level of Emissions,2,4,6,Dollars/ Unitof Emissions,The efficient level ofemissions is where MCA = MSC.,At Eo the marginalcost of abating emissionsis greater than themarginal social cost.,At E1 the marginalsocial cost is greaterthan the marginal benefit.,2005 Pearson Education, Inc.,Chapter 18,18,Ways of Correcting Market Failure,Firms can be encouraged to reduce emissions to the efficient level in three ways:Emissions standardsEmissions feesTransferable emissions permits,2005 Pearson Education, Inc.,Chapter 18,19,Ways of Correcting Market Failure,Options for Reducing Emissions to E*Emissions StandardSet a legal limit on emissions at E* (12)Enforced by monetary and criminal penaltiesIncreases the cost of production and the threshold price to enter the industryEmissions FeeCharge levied on each unit of emission,2005 Pearson Education, Inc.,Chapter 18,20,Standards and Fees,Level of Emissions,Dollars/ Unitof Emissions,2005 Pearson Education, Inc.,Chapter 18,21,Cost is less than thefee if emissions were not reduced.,Standards and Fees,Level of Emissions,Dollars/ Unitof Emissions,3,12,2005 Pearson Education, Inc.,Chapter 18,22,Ways of Correcting Market Failure,Standards Versus FeesAssumptionsPolicymakers have asymmetric informationAdministrative costs require the same fee or standard for all firms,2005 Pearson Education, Inc.,Chapter 18,23,The Case for Fees,Assume two firmsSame marginal social cost curveDifferent marginal abatement cost curvesMCA1 and MCA2Emissions fees are preferable to standards in this caseWe want to reduce total emissions by 14 unitsThe cheapest way to do that is for Firm 1 to reduce by 6 and Firm 2 by 8 units,2005 Pearson Education, Inc.,Chapter 18,24,The Case for Fees,The cost minimizing solution would be an abatement of 6 for Firm 1 and 8 for Firm 2 andMCA1= MCA2 = $3.,2005 Pearson Education, Inc.,Chapter 18,25,The Case for Fines,What if the regulatory agency forces each firm to cut emissions by 7 units?MAC for Firm 1 increases to $3.75MAC for Firm 2 decreases to $2.50This is not cost minimizing because one firm can reduce emissions at a lower cost than the other firmMarginal cost of abatement must be equal between firms for reductions to occur at minimum cost,2005 Pearson Education, Inc.,Chapter 18,26,The Case for Fees,The impact of a standard ofabatement of 7 for both firmsis illustrated.Not efficient becauseMCA2 MCA1.,2005 Pearson Education, Inc.,Chapter 18,27,Ways of Correcting Market Failure,Advantages of FeesWhen equal standards must be used, fees achieve the same emission abatement at a lower costFees create an incentive to install equipment that would reduce emissions further,2005 Pearson Education, Inc.,Chapter 18,28,The Case for Standards,Assume we haveSteep marginal social cost curveFlat marginal cost of abatementAn emissions fee of $8 would be efficient but because of limited information, fee is set at $7Firms emissions increase and with steep MSC, this will lead to significant additional social costs,2005 Pearson Education, Inc.,Chapter 18,29,The Case for Standards,What if standard is used instead and has the same percentage mistake?Standard set at 9 instead of 8Increase in social costs and decrease in abatement costsNet increase in social costs is smaller than with fees,2005 Pearson Education, Inc.,Chapter 18,30,ABC is the increasein social cost less thedecrease in abatementcost.,The Case for Standards,Based on incompleteinformation, standard is 9(12.5% decrease).ADE m*With refundable deposit, MC increases and MC = MSC = MCR,2005 Pearson Education, Inc.,Chapter 18,44,The Efficient Amount of Recycling,2005 Pearson Education, Inc.,Chapter 18,45,Refundable Deposits,Deposit is paid when bottle is purchased and then refunded when bottle returnedCan choose the deposit to give household incentive to recycle moreDeposit increases private cost of disposalSupply of glass comes from new glass and recycled glassIncreasing deposit increases supply of recycled glass and lowers price of glass,2005 Pearson Education, Inc.,Chapter 18,46,Refundable Deposits,Amount of Glass,$,Price falls to P and the amount of recycled glass increases to M*.,Sv,Sr,S,The supply of glass is the sum of the supplyof virgin glass (SV) and the supply of recycledglass (Sr).,M1,P,Without refunds the price of glass is P and Sr is M1.,Sr,S,P,M*,With refunds Sr increasesto Sr and S increases to S.,2005 Pearson Education, Inc.,Chapter 18,47,Externalities and Property Rights,Property RightsLegal rules describing what people or firms may do with their propertyFor example:If residents downstream owned the river (clean water) they would control upstream emissions,2005 Pearson Education, Inc.,Chapter 18,48,Externalities and Property Rights,Bargaining and Economic EfficiencyEconomic efficiency can be achieved without government intervention when the externality affects relatively few parties and when property rights are well specified,2005 Pearson Education, Inc.,Chapter 18,49,Profits Under AlternativeEmissions Choices (Daily),2005 Pearson Education, Inc.,Chapter 18,50,Externalities and Property Rights,AssumptionsFactory pays for the filterFishermen pay for the treatment plantEfficient SolutionBuy the filter and do not build the plant,2005 Pearson Education, Inc.,Chapter 18,51,Bargaining with Alternative Property Rights,2005 Pearson Education, Inc.,Chapter 18,52,Externalities and Property Rights,Conclusion: Coase TheoremWhen parties can bargain without cost and to their mutual advantage, the resulting outcome will be efficient, regardless of how the property rights are specified,2005 Pearson Education, Inc.,Chapter 18,53,Costly Bargaining The Role of Strategic Behavior,Bargaining requires clearly defined rules and property rightsIf property rights were not clear, the other party might not be willing to pay as much and the bargaining process would break downOne party might incorrectly assume the other party will eventually break down and accept lessProblems also arise when there are many parties affected,2005 Pearson Education, Inc.,Chapter 18,54,A Legal Solution Suing for Damages,In many situations involving externalities, one party is harmed (victim)They can recover monetary damages equal to harm sufferedA suit for damages is different than effluent fee since the victim, not the government, is paid,2005 Pearson Education, Inc.,Chapter 18,55,A Legal Solution Suing for Damages Example,Fishermen have the right to clean waterFactory has two options:No filter, pay damagesProfit = $100 ($500 - $400)Filter, no damagesProfit = $300 ($500 - $200),2005 Pearson Education, Inc.,Chapter 18,56,A Legal Solution Suing for Damages Example,Factory has the right to emit effluentFishermen have three options:Put in treatment plantProfit = $200Filter and pay damagesProfit = $300 ($500 - $200)No plant, no filterProfit = $100A suit for damages results in an efficient outcome,2005 Pearson Education, Inc.,Chapter 18,57,The Coase Theorem at Work,Negotiating an Efficient Solution1987 New York garbage spill (200 tons) littered New Jersey beachesThe potential cost of litigation resulted in a solution that was mutually beneficial to both parties,2005 Pearson Education, Inc.,Chapter 18,58,Common Property Resources,CharacteristicsEveryone has free accessLikely to be overutilizedExamplesAir and waterFish and animal populationsMinerals,2005 Pearson Education, Inc.,Chapter 18,59,Common Property Resources,Consider a lake where people fishEach fisherperson takes fish up to the point where the marginal benefit to them equals the marginal costThere is no reason that any one fisherperson take into account how their taking fish affects others experience,2005 Pearson Education, Inc.,Chapter 18,60,Common Property Resources,Private cost underestimates the true cost to societyMore fishing reduces the stock of fishLess is available to others and too low of a stock will completely deplete the fishToo many fish are caught,2005 Pearson Education, Inc.,Chapter 18,61,Common Property Resources,Fish per Month,Benefits,Costs($ perfish),However, private costsunderestimate true cost.The efficient level of fish/month is F* whereMSC = MB (D).,Without control, the numberof fish/month is FC where PC = MB.,2005 Pearson Education, Inc.,Chapter 18,62,Common Property Resources,SolutionPrivate ownershipOwner will set fee for use of resource equal to the marginal cost of depleting the stockFishermen will no longer find it profitable to catch more than the efficient amount of fishIt is often the case that when private ownership is not possible, the government steps in,2005 Pearson Education, Inc.,Chapter 18,63,Crawfish Fishing in Louisiana,Crawfish has become very popular in restaurantsAs a common property resource, too many crawfish have been trapped, causing the population to fall below efficient levelFinding the Efficient Crawfish CatchF = crawfish catch in millions of pounds/yrC = cost in dollars/pound,2005 Pearson Education, Inc.,Chapter 18,64,Crawfish Fishing in Louisiana,DemandC = 0.401 = 0.0064FMSCC = -5.645 + 0.6509FPCC = -0.357 + 0.0573FEfficient CatchD = MSC9.2 million pounds,2005 Pearson Education, Inc.,Chapter 18,65,Crawfish Catch(millions of pounds),Cost($/pound),Crawfish as a CommonProperty Resource,2005 Pearson Education, Inc.,Chapter 18,66,Public Goods,CharacteristicsNonrivalFor any given level of production, the marginal cost of providing it to an additional consumer is zeroNonexclusivePeople cannot be excluded from consuming the goodExample use of lighthouse by a ship,2005 Pearson Education, Inc.,Chapter 18,67,Public Goods,Nonexclusive goodsGoods that people cannot be excluded from consuming, so that it is difficult or impossible to charge for their useExample: fireworks, national defense,2005 Pearson Education, Inc.,Chapter 18,68,Effic