MICRO Homework 11
The optimum level of pollution emissions...
Occurs where the marginal external cost equals the marginal cost of abatement.
What is a negative externality connected to automobile transportation?
The fact that in an accident, a person who chooses not to wear a seatbelt becomes an object moving around the inside of the car, possibly hitting other, belted-in, passengers with force.
What is a negative externality to attending college?
The fact that the people in the next room play loud music at hours you want to sleep.
Externalities...
are not reflected in market prices, so they can be a source of economic inefficiency.
A firm will avoid producing additional emissions whenever the fee is...
greater than the MCA
To enforce the optimum level of emissions, a government could set an emission fee, which would be...
the dollar value indicated by the intersection of the MSB and MCA curves, and would apply to every unit the firm emitted.
When there are externalities, economic efficiency can be achieved without government intervention...
when the externality affects only a few parties and property rights are well defined.
