MAE101 Lecture Notes - Lecture 9: Telstra, Invisible Hand, Competition Regulator
Document Summary
In summary- these examples of externalities lead to some general lessons: Negative externalities in production or consumption lead markets to produce a larger quantity than is socially desirable. Positive externalities in production or consumption lead markets to produce a smaller quantity than is socially desirable. To remedy the problem, the government can internalise the externality by taxing goods that have negative externalities and subsidising goods that have positive externalities. Private solutions too externalities: both private individuals and public policymakers respond to externalities in various ways. All of the remedies share the goal of moving the allocation of resources closer to the social optimum. Moral codes and social sanctions- most people do not litter simply because it is the wrong thing to do. Charitable organisations- many charities are established to deal with externalities. integrating different types of businesses- for example, sweet store and cinemas next to each other.
