Negative Externalities - PowerPoint PPT Presentation

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Negative Externalities

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Negative Externalities Where the Free Market Needs Help EXTERNALITIES An externality is the uncompensated impact of one person s actions on another person ... – PowerPoint PPT presentation

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Title: Negative Externalities


1
Negative Externalities
  • Where the Free Market Needs Help

2
EXTERNALITIES
  • An externality is the uncompensated impact of one
    persons actions on another person

3
Efficiency requires
  • All costs of production must be counted by
    producers
  • If pollution is not counted gt society bears
    the costs of production

4
Negative Externalities
  • Automobile exhaust
  • Cigarette smoking
  • Barking dogs (loud pets)
  • Loud stereos in an apartment building
  • Noisy Students
  • Neighbors poorly maintained property
  • Pollution

5
Positive Externalities
  • Restored historic buildings
  • Research into new technologies
  • Neighbors well maintained property

Youtube videocool examples
6
MARKET INEFFICIENCY
  • Negative externalities lead markets to
    overproduce

S2
Market price should be here
Quantity demanded/ supplied at the true price
should be here
7
Specific Examples
Lake Erie
Before
After Regulation/Clean Up Efforts
8
Acid Rain
9
Global Warming
10
Solutions to Pollution
  • Increase Government Regulation
  • a) Tax the pollutant
  • b) Fine corporations/individuals who pollute
  • c) Provide incentive to not pollute

carbon, etc.
oil
11
Creating an Incentive to Not Pollute Cap Trade
System
  • Govt can create a system of trading pollution
    credits

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12
(No Transcript)
13
Global Pollution Standards
  • Questions to consider
  • Who is in charge of pollution standards?
  • 2. Should countries all have the same pollution/
  • environmental standards?
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