MGT 621 – Microeconomics
7. Externalities and Regulation
Lecture Notes (Overheads Used In Class)
· Pindyck/Rubinfeld, Ch. 18
· What is a (positive/negative) externality? Provide examples.
· Who should pay for the negative effects of an externality, the one who causes it or the one who experiences a detrimental payoff impact? Provide examples.
· How can taxes be used to “internalize” the effects of negative externalities?
· What role do property rights play when resolving conflicts resulting from externalities?
· Explain the role of uncertainty in a social planner’s choice between emissions permits and emissions taxes.
Background Reading (for future reference only)