Public goods and externalities (L18)

Question 1

under-provision

Answer 1

unregulated market means pareto improvement is possible

Question 2

free riding

Answer 2

using things that you should pay for, for free

Question 3

positive externality

Answer 3

if A buys a public good it benefits Bs utility

Question 4

samuelson rule

Answer 4

pareto optimal good provision
MRSA + MRSB =MC
if MC < MSB then buy public goods
if MC< MPB then buy public
MRSA=MC MRSB=MC

Question 5

denoting a firms emissions (externalities)

Answer 5

yA+yB

Question 6

how to know if firms are welfare maximising

Answer 6

pareto efficient
dU/dy for both A and B, sum of that= py/px
if this is lower than their individual one, they’re at market equilibrium (using more negative externality than allocated)

Question 7

pigouvian taxation

Answer 7

taxing to account for the externality

Question 8

net marginal benefit

Answer 8

differentiate utility function 1/yA?

Question 9

private mc of pollution

Answer 9

py+a

Question 10

social mc of consumption

Answer 10

1+a+b

Question 11

Pareto optimal public good permission

Answer 11

MRS A + MRS B = MC
SAMUELSON RULE