Government

1. Coase Theorem

Annotations:

• A court order forbidding the continuation of behavior to damages or regulation that stops you from damaging society

Annotations:

• Laws that requires A to compensate B for damaging imposed. b owe duty of care to A for damaging imposed

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• 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

1. Non-rival Consumption

   Annotations:

   • characteristic of public good: one person's enjoyment of the benefits of a public good does not interfere with another's consumption of it.
2. Non excludable

   Annotations:

   • it is also the characteristic of public good: once good is produced, no one can be excluded from enjoying its benefits
3. Free-ride Problem

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   • 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
4. Drop in the bucket problem

   Annotations:

   • 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.
5. Samuelson - Musgrave Theory

   Annotations:

   • 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. 
6. Tiebout Hypothesis

   Annotations:

   • 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

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• 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

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• the amount that consumer pays to consume an additional unit of a particular good.

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• the additional harm done by increasing the level of an externality producing activity by unit 1

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• it occurs where the Marginal Social benefit equals to the Marginal Social Cost

Annotations:

• it occurs where Marginal Benefit equals to the Marginal Private cost