ECN 104 Lecture Notes - Lecture 11: Marginal Utility, Marginal Cost, Social Cost

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Cost and benefit of pollution: additional cost imposed on society as a whole by an additional unit of. Marginal social cost (msc) pollution: msc = mpc + mec. Sum o the willingness to pay among all members on society to avoid that unit of pollution. Marginal external cost (mec: additional cost imposed on others when polluter, produces one more unit of pollution. Marginal private cost (mpc: additional cost imposed on the polluter, if polluter produces one more unit of pollution. Marginal social benefit (msb: additional gain to society as a whole from an additional unit of pollution, msb = mpb + meb. Highest willingness to pay for the right to emit that unit of measured across all polluters. Marginal private benefit (mpb: additional benefit the polluter received, from producing one more unit of pollution. Marginal external benefit (meb: additional benefit the others received, if polluter producing one more unit of pollution.

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