Questions tagged [externalities]

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Empirical evidence on what makes a border adjustment successful at correcting a distortion without exporting externalities?

One of the challenges of constructing a national or regional market-correction scheme to remove the distortions from negative externalities, is that such a scheme is liable to create leakage: for ...
2
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1answer
43 views

Is loss in tax revenue a negative externality?

I was thinking about how online gambling could cause numerous governments to face a reduction in tax revenue from conventional gambling, upon which taxes do apply in most countries. If governments ...
2
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0answers
212 views

Pigouvian subsidies for non-linear marginal external benefits

Suppose an agent is choosing how much $x$ to consume and $p_x=200$. If the agent's marginal private benefit is $MPB(x)=300/x$ and $x$ takes only integer values, then he will choose to purchase just ...
2
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0answers
151 views

Competitive prices, tax and lump sum cash transfer in case of externalities

An economy is made up of two people. The utility functions are $$u_1(x_{11},x_{12}) = x_{11}x_{12}$$ $$u_2(x_{21},x_{22}) = 2x_{21} + 2x_{22} −x_{11}$$ The initial endowments are $ω_1 = (1,0)$ and $...
1
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0answers
371 views

Private and Social Optimum with externality in this example

Firstly, I wanted to know if we may be consider as an externality, a situation such that a customer A bought a bike to a seller B, not properly checked - and which may provoke some accidents. ...
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0answers
24 views

Question on Finding the Correct Emission Tax $t$

Let there be two companies $U_{1}$ and $U_{2}$ where, initially $U_{1}$ produces and sells $x$ units at $p=18$. Production costs are $C_{U_{1}}(x)=\frac{1}{6}x^3$ and in the process $a$ units of ...
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0answers
209 views

Finding Pareto efficiency from competitive equilibrium

So to my knowledge, the competitve equilibrium would be Marginal cost= Marginal private benefit. My question is, how would you determine what the pareto efficiency is from the Marginal social benefit ...
-1
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0answers
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What is the socially optimal solution when MSB does not equal MSC at any point?

I had an economics paper today, and there was a question for finding the socially optimal level of pollution given the benefits to factories and cost to citizens. We were given a set of discrete ...