A court order forbidding the continuation of behavior to damages or regulation that stops you from damaging society
Liability Law
Nota:
Laws that requires A to compensate B for damaging imposed. b owe duty of care to A for damaging imposed
Public Goods (social or collective goods)
Nota:
Goods that are nonrival in consumption and/or their benefits are nonexcludable.
these goods (nonrival or nonexcludable ) represent a market failure because they have the characteristic that make it difficult for the private sector to produce them profitably.
in an unregulated economy with no government, public goods would be the best solution to be produced in insufficient quantity and at worst not produced at all
Non-rival Consumption
Nota:
characteristic of public good:
one person's enjoyment of the benefits of a public good does not interfere with another's consumption of it.
Non excludable
Nota:
it is also the characteristic of public good:
once good is produced, no one can be excluded from enjoying its benefits
Free-ride Problem
Nota:
A problem intrinsic to public goods:
because people can enjoy the benefits of public goods whether or not they pay for them, they are usually unwilling to pay for them
Drop in the bucket problem
Nota:
A problem intrinsic to public goods: the good or service is usually so costly that its provision generally does not depend on whether any single person pays.
Samuelson - Musgrave Theory
Nota:
how societies as opposed to individuals make choices. the point is that price mechanism forces people to reveal what they want, and it forces firms to produce only what people are willing to pay for, but it works this way only because exclusion is possible.
Tiebout Hypothesis
Nota:
an efficient mix of public goods is produced when local land/housing prices taxes come to reflect consumer preferences just as they do in the market for private goods
Marginal Cost
Marginal Social Cost / MSC
Nota:
The total cost to society of producing an additional unit of good or service.
MSC = to the sum of the MC of producing the product and the correctly measured damage costs involved in the process of production
Marginal Private Cost/ MPC
Nota:
the amount that consumer pays to consume an additional unit of a particular good.
Marginal Damage Cost/MDC
Nota:
the additional harm done by increasing the level of an externality producing activity by unit 1
Social Optimum point
Nota:
it occurs where the Marginal Social benefit equals to the Marginal Social Cost
Inneffeciency
Nota:
it occurs where Marginal Benefit equals to the Marginal Private cost