lecture 7 externalities stefanie stantcheva fall 2017 1 41 outline second part of course is going to cover market failures and show how government interventions can help 1 externalities and ...
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...Lecture externalities stefanie stantcheva fall outline second part of course is going to cover market failures and show how government interventions can help public goods asymmetric information social insurance failure a problem that violates one the assumptions st welfare theorem causes economy deliver an outcome does not maximize eciency externality arise whenever actions economic agent directly aect another outside mechanism example steel plant pollutes river used for recreation uses more electricity bids up price other customers are important case theory economics negative production when rm s reduces well being others who compensated by private marginal cost pmc direct producers producing additional unit good damage md any costs associated with imposed on but do pay smc plus face pollution regulation hence ignores deciding much produce...