Outline - Manhasset Public Schools

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Name:

Mrs. Law AP Economics

What are externalities, and how do they affect markets?

1.

2.

What are externalities?

What are internal costs?

Due Date: January 28, 2016

Market Inefficiencies: Externalities and Public Goods

3.

4.

What are external costs?

What are social costs?

The Third Part y Problem

1.

When does an externality exist?

2.

What does the phrase a “third party problem” mean? a.

When does a negative externality exist? b.

c.

When does a positive externality exist?

What is the significance of the social optimum? d.

What does it mean to have an externality “internalized”?

Figure 7.1 Correcting a Negative Externality: include graph and corrective measures

Figure 7.2 Correcting a Positive Externality: include graph and corrective measures

What are private goods and public goods?

1.

What are property rights?

2.

What role do property rights play in market inefficiencies, specifically the relationship to externalities?

Private Property

1.

What is private property?

2.

What is the relationship between private property rights and externalities?

The Coase Theorem

1.

What does the Coase Theorem state?

2.

Why may the Coase Theorem result be difficult to achieve in reality?

Private and Public Goods

Excludable Goods

Rival Goods

Private Goods

Public Goods

Free Rider Problem

Common Resource Goods

Table 7.3 The Four Types of Goods: redraw the table from page 226

What are the challenges of providing nonexcludable goods?

Cost Benefit Analysis

Tragedy of the Commons

Example of the tragedy of commons occurring in society

Incentives associated with common property and thus leading to the “tragedy of commons”

Solutions to the Tragedy of the Commons

Cap and Trade

Pros and Cons of such a program

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