ECO 304K Lecture Notes - Lecture 10: Externality, Transaction Cost, Coase Theorem
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ECO 304K Full Course Notes
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Document Summary
Market equilibrium both maximizes social welfare & efficiency. Efficient at equilibrium except during externalities, where supply and demand create something else altogether. A situation where a voluntary transaction between a seller and a buyer imposes external costs. The ones breathing the polluted air is not / could not only be the ones participating in the market. The burden of externalities is carried by a third party. Another example would be people who are driving, distracted by a billboard. Command & control regulations (info on textbook is incorrect) Negative externalities c&c regulations: they are issued by regulatory agencies (e. g. , epa, fda, etc, they require the business to do something (adopt a particular technology, etc. ) or to refrain from doing something. Social heath, safety, environmental, security c&c looks at input more. Economic entry and exit looks at outcome more. Example: there are only 4 can companies in austin.
