中级微观经济学——理论与应用（第10版）（经济学经典教材·双语教学用书）尼克尔森等著0324319681_67680上课用课件.ppt

Chapter 18 Externalities and Public Goods Defining Externalities An externality is the effect of one party’s economic activities on another party that is not taken into account by the price system. Externalities can occur between any two economic actors. Externalities can be beneficial or harmful. Externalities between Firms One of the most famous beneficial externalities between firms involves one firm producing honey and the other producing apples. Bees feed on apple blossoms, which increases the production of honey, and Bees pollinate apple crops, which increases the production of apples. Externalities Firms can generate air, water, and other types of pollution when producing products. Alternatively, auto pollution, graffiti, and noise are some externalities imposed by people on firms. When people do things that harm others, like playing their radios loudly, or help, like shoveling their sidewalk, they can impose externalities on other people. Reciprocal Nature of Externalities In dealing with externalities it is important to recognize that both parties are needed for an externality to exist. If the eyeglass producer was not located near the charcoal factory, there would be no externality. If another person was not around, no one would be bothered when someone plays their radio loudly. Externalities and Allocational Efficiency The presence of externalities can cause a market to operate inefficiently. In the previous example an externality affected the production of eyeglasses. The firm producing charcoal did not take into account the negative effect its production had on the production of eyeglasses. Social Costs Social costs are the costs of production that include both input costs and costs of the externalities that production may cause. In the previous example, by not recognizing the externality in its production, the charcoal firm produced too much. Society would be better-off by reallocating resources away from charcoal production and toward the productio