Micro economic ECONOMICS OF THE ENVIRONMENT讲解材料.ppt

17;We burn huge quantities of fossil fuels—coal, natural gas, and oil—that cause acid rain and global warming. We dump toxic waste into rivers, lakes, and oceans. These environmental issues are simultaneously everybody’s problem and nobody’s problem. The fish stocks in the world’s oceans are not owned by anyone. They are common resources that everyone is free to use. But we are overusing our fish stocks and brings some species into extinction. What can be done to conserve the world’s fish stocks?;Negative Externality: Pollution;Negative Externality: Pollution;Negative Externality: Pollution;Negative Externality: Pollution;External Cost and Output Figure 17.1 illustrates the MC curve, the MSC curve, and marginal external cost as the vertical distance between the MC and MSC curves.;Negative Externality: Pollution;Figure 17.2 shows the equilibrium in an unregulated market with an external cost. The quantity of the good produced is where marginal private cost (MC) equals marginal social benefit (MSB). ;At the market equilibrium, MSB is less than MSC, so the market produces an inefficient quantity of the good. At the efficient quantity of the good, MSC = MSB. With no regulation, the market produces too much of the good and creates a deadweight loss.;Negative Externality: Pollution;Figure 17.3 illustrates how the establishment of property rights achieves an efficient outcome. The producer of the good bears all the costs. The market outcome is efficient because at the quantity of the good produced MSC equals MSB.;Negative Externality: Pollution;Negative Externality: Pollution;Negative Externalities: Pollution;Negative Externalities: Pollution;Figure 17.4 shows how a pollution tax equal to the marginal external cost can achieve an efficient outcome. At the quantity of the good produced MSC = MSB. The government collect a tax revenue.;Negative Externality: Pollution;Negative Externality: Pollution;The Tragedy of the Commons;The Tragedy of the Commons;The Tragedy of the C