ECON101 Lecture Notes - Lecture 5: Deadweight Loss, Transaction Cost, Quasi

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sapphireelk701

21 Mar 2017

School

University of Delaware

Department

Economics

Course

ECON101

Professor

Kievana Haynes

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S ocia l cos t= priva te cos t+ e xte rna l cos t. Exa mple : pollution, ciga re tte s moke. S ocia l be ne fit=priva te be ne fit + e xte rna l be ne fit to s um it up: Exte rna litie s = ca s e s of market failure : ove rproduction= ne ga tive e xt, unde rproduction=pos itive e xt. *the re will be de a d we ight los s. The coa s e the ore m: exte rna litie s a ris e b/c of incomple te prope rty rights or from the difficulty of e nforcing prope rty rights in ce rta in s itua tions. Property rights : rights of individua ls a nd bus ine s s e s ha ve to the e xclus ive us e of the ir prope rty.

Related Questions

In an article in the agriculture magazine Choices, Oregon State University economist JunJie Wu made the following observation about the conversion of farmland to urban development:

Land use provides many economic and social benefits but often comes at a substantial cost to the environment. Although most economic costs are figured into land-use decisions, most environmental externalities are not. These environmental 'externalities" cause a divergence between private and social costs for some land uses, leading to an inefficient land allocation. For example, developers may not bear all the environmental and infrastructural costs generated by their projects. Such market failures provide a justification for private conservation efforts and public land use planning and regulation.

Source: JunJie Wu, "Land Use Changes: Economic, Social, and Environmental Impacts," Choices, Vol. 23, No. 4, Fourth Quarter 2008, pp. 6-10.

By market failure, the author means:

(i) benefiting from a good without paying for it.

(ii) a situation that occurs when one person's consumption of a unit of a good means no one else can consume it.

(iii) a situation in which the market fails to produce an efficient level of output.

(iv) a situation in which a benefit is present that affects someone who is not directly involved in the consumption of a good or service.

(v) the tendency for a common resource to be underused.

cyanhound711

The private cost of producing a good will differ from the social cost:

A. when there is an externality, such as acid rain generated by the production of electricity.

B. when there is an externality, such as lower crime rates generated by the consumption of education.

C. when there are property rights, where individuals or businesses have exclusive use of their property.

D. when there is no externality, such as in the production of ice cream.

E. both a and b.

raspberryhorse169

1. Government failure occurs

		A. when the market provides the wrong amount of a certain good.
		B. never, government intervention always improves social utility.
		C. when the benefit of a government intervention exceeds its cost.
		D. when the cost of a government intervention exceeds its benefit.

2. The opportunity cost of government intervention is

A. Lost public sector production.

B. Lost private-sector production.

C. higher government debt.

D. higher taxes.

3. Give an example of negative externality and explain what kind(s) of policies the government uses to correct this externality.

4. Why is it difficult to use cost-benefit analysis on government spending decisions?

plummuskrat754

ECON101 Lecture Notes - Lecture 5: Deadweight Loss, Transaction Cost, Quasi

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