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Lecture Comments (9)

1 answer

Last reply by: john lee
Sun Feb 28, 2016 5:54 AM

Post by john lee on February 28 at 05:53:04 AM

Does the negative externality necessarily cause supply curve to shift left rather than demand curve to shift left? I believe it is determined by the object (customers or producers).

1 answer

Last reply by: Professor Jibin Park
Wed Apr 22, 2015 12:26 AM

Post by Kim Gyu Min on April 22, 2015

I have a question about DWL.
So when there is a negative externality DWL(triangle) forms right side of E(opt), and when there is a positve externality DWL(triangle) forms left side of E(opt).

Please correct me if I'm Wrong little bit confused.

0 answers

Post by Rebecca Dai on November 9, 2014

And is the market equilibrium just the MPB?

1 answer

Last reply by: Rebecca Dai
Sun Nov 9, 2014 7:23 PM

Post by Rebecca Dai on November 9, 2014

At 32:40, why is that triangle area the DWL? I don't understand why. Thanks

0 answers

Post by Rebecca Dai on November 9, 2014

Why does MPC shift to the right comparing to MSC?

0 answers

Post by Rebecca Dai on November 9, 2014

Do we need to know why the government should tax negative externality and subside the positive graphically? Thanks

Positive & Negative Externalities

  • Externalities are effects (positive or negative) that take place in which the person making a decision creates benefits (or costs) to all of society.
  • A firm has no individual incentive to curtail pollution because the firm is not paying the cost in its decision to pollute.
  • Decisions that generate positive externalities are inefficiently low because individuals are simply looking to maximize private benefit.
  • A private (or Coase) solution to externalities would be to internalize the externalities through private negotiations.
  • A government solution to correct negative externalities is to tax the behavior.
  • A government solution to encourage positive externalities to subsidize the good behavior.

Positive & Negative Externalities

Lecture Slides are screen-captured images of important points in the lecture. Students can download and print out these lecture slide images to do practice problems as well as take notes while watching the lecture.

  • Intro 0:00
  • Lesson Overview 0:07
  • The Economics of Pollution 1:06
    • Marginal Social Cost of Pollution
    • Marginal Social Benefit of Pollution
    • Socially Optimal Quantity of Pollution
  • Socially Optimal Quantity of Pollution 3:38
    • Upward-Sloping MSC Curve
    • Downward-Sloping MSB Curve
    • Socially Optimal Point
    • Market-Determined Quantity of Pollution
  • Graphing a Negative Externality 7:28
    • Negative Externality
    • High Market Price, Low Market Quantity
  • Graphing a Positive Externality 11:49
    • Positive Externality
    • Low market Price, Low Market Quantity
  • Government Solution 15:17
    • Correct a Negative Externality
    • Correct a Positive Externality
  • Private (or Coase) Solution 20:29
    • Coase Theorem
    • Example
  • Negative Externality Example 23:14
  • Positive Externality Example 26:49
  • Externality Example 30:22
  • Another Externality Example 33:01
  • Final Externality Example 35:37