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ECON 1010 (102)
Lecture 54

ECON 1010 Lecture 54: Lecture 54

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ECON 1010
Laura K.Brown

o|82 o Better international competitiveness o Improved economic efficiency and productivity 1. People do not consider these external benefits when deciding how much education to “purchase” 1. Result: with the free market equilibrium the consumption of education is too low 1. How government may improve the market outcome? 1. By subsidizing the cost of education 2. The analysis of positive externalities is similar to the analysis of negative externalities 3. Because the social value is greater than the private value, the social value curve lies above the demand curve 4. The optimal quantity is found where the social value curve and the supply curve (which represents costs) intersect 5. The socially optimal quantity is greater than the quantity determined by the private markets 6. The government can correct the market failure by inducing market participants to internalize the externality 7. To move the market equilibrium closer to the social
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