Externalities课件.ppt

Figure 11b: A Tax on Producers to Correct a Negative Externality 100 125 D $1.00 $0.50 B (b) Millions of Gallons per Period Dollars $1.30 $0.80 SBefore Tax SAfter Tax 6. shifts the supply curve upward . . . 7. and moves the equilibrium to the efficient quantity. 5. A tax per unit on producers, equal to the negative externality per unit, A 精品文档 Taxing a Negative Externality Government could use a tax on producers to move gasoline market to point B Payment of the externality tax is shared between consumers and producers, as is the payment of any tax, and will depend on elasticities of supply and demand A tax on each unit of a good, equal to the external harm it causes, can correct a negative externality and bring market to an efficient output level Consider the logic of this result Tax cures the inefficiency because it forces market to internalize the externality To take account of the harm caused by gasoline Suggests that a tax on consumers of gasoline would work just as well as a tax on producers Taxes to correct negative externalities have been used in countries around the world In United States, however, taxes designed to correct negative externalities are less common 精品文档 Regulation and Tradable Permits A tax is not only way to correct a negative externality Government can also use regulation to move a market closer to the efficient point In last two decades, U.S. government has relied increasingly on an innovative technique to reduce several types of pollution Tradable permits License that allows a company to release a unit of pollution into the environment over some period of time Firms can trade their permits in an organized market Left to itself, a market with a negative externality will produce too much output Taxes, regulation, and tradable permits are examples of government intervention to decrease output toward efficient level 精品文档 Dealing with a Positive Externality What about the case of a positive externality? By-product of an activity or a service