Eksternalitas Negatif & Positif Ekonomi Mikro.

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1. Chapter 3
Externalities and Public Policy

2. Externalities
Externalities are costs or benefits of
market transactions not reflected in
prices.
Negative externalities are costs to third
parties.
Positive externalities are benefits to third
parties .

3. Externalities and Efficiency
The marginal external cost is
the dollar value of the cost to
third parties from the
production or consumption of
an additional unit of a good.
This occurs when there is a
negative externality.

4. Social Costs
MSC = MPC + MEC

5. Figure 3.1 Market Equilibrium, A Negative
Externality and Efficiency
D = MSB
S = MPC
MPC + MEC = MSC
10
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Tons of Paper Per Year (Millions)
110
105
100
4.55
A
B
G
10

6. Implications of Figure 3.1
Market equilibrium occurs
where
MSC = MSB
Efficiency Requires that
MSC = MPC + MEC = MSB

7. Positive externalities
The marginal external benefit is the
dollar value of the benefit to third
parties from an additional unit of
production of consumption of a
good. This occurs when there is a
positive externality.

8. Social Benefit
MSB = MPB + MEB

9. Figure 3.2 Market Equilibrium, A Positive Externality
and Efficiency
S = MSC
MPB + MEB = MSB
H
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Inoculations Per
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10
25
30
45
1012
0

10. Figure 3.3 A Positive Externality for Which MEB
Declines With Annual Output
S' = MSC'
C
B
F
A
S = MSC
MPB
i
MPB
i + MEB = MSB

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Inoculations per Year (Millions)
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20
10 12 16 20

11. Internalization of Externalities
An externality can be
internalized if there is a
policy that causes market
participants to account for
the costs of benefits of their
actions.

12. Corrective Taxes to Negative
Externalities
 Setting a tax equal to the
MEC will internalize a
negative externality.

13. Figure 3.4 A Corrective Tax
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Tons of Paper Per Year (Millions)
100
5
110
105
95
4.5
D = MSB
S = MPC
A
S’ = MPC + T = MSC
Tax Revenue = Total
External Costs
T
Net Gains in
Well-Being
G
B

14. Results of a Corrective Tax
Socially optimal levels of
production are achieved.
The tax revenue is sufficient
to pay costs to third parties.

15. Using a Corrective Tax
The greenhouse effect and a “Carbon
Tax”
If it is accepted that the greenhouse effect is
caused by burning carbon-based fuels, a
carbon tax can be imposed to limit
greenhouse gasses to their socially optimal
levels.
It is called a carbon tax because the amount
of the tax would depend on the amount of
carbon in the fuel.

16. Theory of the Second Best
When one condition for an
optimum is violated then
maintaining the others will
not guarantee a second-
best solution.

17. A Polluting Monopolist
In Chapter 2 it was shown that
monopoly created a loss to society. In
this chapter it was shown that a
negative externality causes a loss as
well.
The losses do not necessarily add to
one another. In fact, they can cancel
each other out.

18. Figure 3.5 A Second Best Efficient Solution
D = MSB
MPC
MPC + MEC = MSC
MR
P
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Output per Year
0 Q
M Q*
P M
A
F
B
C

19. Corrective Subsidies
Setting a subsidy equal to
MEB will internalize a
positive externality

20. Subsidy Payments
Figure 3.6 A Corrective Subsidy
i
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Y
D = MPB
D' = MPB + $20 = MSB
S = MSC
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Inoculations per Year (Millions)
0
45
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10
10 12
Z
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21. Coase's Theorem
By establishing rights to use
resources government can
internalize externalities when
transactions or bargaining
costs are zero.

22. Figure 3.7 Coase’s Theorem
B A
MC
W

MC*
W
MPC
B
+ MEC = MSC
MPC
B
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Wheat Output per Year
P
W

Q* W Q
W1

Beef Output per Year
Q*
B

Q
B1
P
B

23. Limitations of Coase’s Theorem
Transactions costs are not
zero in many situations.
However you allocate the
property right, the distribution
of income is affected.

24. Applying Coase's Theorem
The Clean Air Act of 1990 allows for the
sale of the "right to pollute." Firms face
a tradeoff when they pollute. If they
pollute they forgo the right to sell the
emission permit to others.
With electricity this has motivated firms
to shift to natural gas and away from
coal as a means of producing electricity.

25. Figure 3.8 Pollution Rights and Emissions
S = Supply of Pollution Rights
D = MSB of
Emitting Wastes
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Tons of Annual Emissions
and Number of Pollution Rights
0
$20
75,000100,000

26. Figure 3.9 The Efficient Amount of Pollution
Abatement
E
MSB
MSC
M
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Percent Reduction in Wastes Emitted per Year
0 A* 100

27. Regulatory Solutions
Instead of using market
forces to cause firms to
internalize externalities we
can use emission standards
and apply these to all.

28. Figure 3.10 Regulating Emissions: Losses in Efficiency
From Differences in the Marginal Social Benefit of
Emissions
A
MEC = MSC
MSB
MEC = MSC
MSB
B
C
F
Q
RB
Q
RA
G
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0
Q
R

10
Firm A
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Firm B
Q*
A
Q*
B
Q
B1

Q
B1
Tons of Emissions per Year

29. Figure 3.11 Losses in Efficiency From Emissions
Standards When MEC Differs Among Regions
MEC = MSC
MSB
MEC = MSC
S
Y
Z
T
R
X
Q
RD
Q
RC
Firm C
Tons of Emissions per Year
Firm D
20
Q*
C
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Q*
D
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30. Sulfur Dioxide Emission Prices
SOURCE: United States Environmental Protection Agency
250
200
150
100
50
0
8/1/94
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Month/Year
8/1/95 8/1/95 8/1/958/1/95 8/1/95
Fieldston Publications Price Index Cantor Fitzgerald Market Price Index

31. Global Externalities
CFC’s
Deforestation
Global Warming