ECON 1000 Lecture Notes - Lecture 16: Externality, Marginal Utility, Deadweight Loss
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4 types of externalities: negative production externalities (common, ex. Burning coal to generate electricity emits carbon dioxide. Logging and clearing forests destroy the habitat of wildlife and adds carbon dioxide to the atmosphere. Negative consumption externalities are a common part of everyday life. Smoking tobacco in a confined space poses a health risk to others. Noisy parties or loud car stereos disturb others or cellphone ringing in class: positive consumption externalities (common, ex. When you get a flu vaccination, everyone you come into contact with benefits. When the owner of an historic building restores it, everyone who sees the building gets pleasure. Msc= mc + marginal external cost: valuing an external cost, suppose that there are two similar rivers, one polluted and the other clean with 10 identical riverside homes. The homes on the clean river rent for ,000 a month, and those on the polluted river rent for ,500 a month.