ECO102H1 Lecture Notes - Free Rider Problem, Allocative Efficiency, Marginal Utility
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ECO102H1 Full Course Notes
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Office hours: thursdays from 1 - 3 pm ge351. We don"t get the outcome that we want. Natural monopoly: declining atc, constant mc curve, as output expands, Negative production externality: the price will be too low and the output too high. When cost/benefits are external to the market. Public goods - things that individuals will never buy there own: public and private goods. Excludability: a person can be excluded from using a good. Rivalness: one person"s use of a good diminishes with other people"s use. Key result: private market cannot produce public goods. : non-excludable, non-rival (fireworks, national defense: the provision of public goods. Yes, total value > total cost => efficient to build. Marginal benefit versus cost to the town. An entrepreneur requires from each owner to build. Yet no owner will pay since he cannot be excluded from the benefit of the lighthouse once it is built. Private market fails because of the free rider problem.
