Microeconomics

Leeds, vonAllmen and Schiming

Chapter 17, Market Failure: Public Goods and Externalties

1. Public and Private Goods

2. Pure Public Goods
   1. Free rider problem and the willingness to pay
   2. Market demand for public goods
   3. Government solution
   4. Decision to provide the good
   5. Funding sources
      1. Taxes
         1. Head tax
         2. Proportional income tax
         3. Regressive tax
         4. Progressive tax
      2. Why don't most married couples contribute equally to joint purchases
   6. Private provision of public goods
      1. funding by donation
      2. excluding non-payers
      3. private contracting
      4. sale of byproducts
3. The problem of the commons
   1. The resource is unpriced
   2. Consume the good to the point where MC = 0
   3. Renewable resources - fish and catch limits
   4. Non-renewable resource - optimal rate of depletion of the common pool
   5. The commons problem as an externality problem
4. Collective goods: No problem?
   1. From broadcast to cable TV
   2. Loss in economic surplus
5. Externaltities

6. The Coase Theorem
   1. Externalities: Quiet hours in the dormitory
   2. Commons Goods: Chesapeake Bay
7. Government and Solving Market Failure
   1. Legal remedies and regulation
      1. Catch limits in the crab and lobster fisheries
      2. Speed limits
      3. Zoning laws
      4. Pollution discharge limits
   2. Taxes and subsidies
      1. Pigouvian Taxes
         1. Tax the discharge
         2. Tax the good produced
         3. Tax the inputs
      2. Subsidies
   3. Marketable permits
8. Positional externalities
   1. Why do football players take anabolic steroids?
   2. Why do many grocery stores stay open all night, even in small towns?
   3. Positional arms control agreements
      1. campaign spending limits
      2. roster limits
      3. arbitration agreements
      4. mandatory kindergarten starting ages