Transcript Relational Data Base Fundamentals

SMC = PMC +
MD
Price
of steel
S=PMC
TheThe
yellow
steeltriangle
firm sets
is the
consumer
PMB=PMC
andto
producer
find
its firmoptimal
The
steel
socially
overproduces
level of
privately
surplus
optimal
at Q
. society’s
1profit
from
production
is at
viewpoint.
Q2, the
maximizing
output,
This
Theframework
marginal damage
does
notQ1. of SMC and SMB.
intersection
The red triangle is the
curve
capture
(MD)
therepresents
harm donethe
to
The social marginal cost deadweight
is
loss from the
fishery’s
the fishery,
harm
however.
per unit.
the sum of PMC and MD, and
private production level.
represents the cost to society.
MD
p2
p1
D = PMB =
SMB
0
Figure 2
Q2
Q1
Negative Production Externalities
QSTEEL
Price of
cigarettes
S=PMC=SMC
The The
yellow
smoker
triangle
sets
is the
surplus
PMB=PMC
to thetosmokers
find his
privately
(and producers)
optimal quantity
at Q1.
of
cigarettes,
The
ThisThe
MD
framework
curve
represents
does Q
not
1.benefit is
social
marginal
the
capture
nonsmoker’s
harmharm
done
per
to PMB
the the
difference
between
The red triangle is the
non-smokers,
pack of cigarettes.
however.
and MD.
deadweight loss from the
private
production
The
The socially
smoker
optimal
consumes
leveltoo
of level.
MD
manysmoking
cigarettes
is at
from
Q2,society’s
the
intersection
viewpoint.
of SMC and SMB.
p1
p2
D=PMB
SMB=PMB-MD
0
Figure 3
Q2
Q1
Negative Consumption Externalities
QCIGARETTES
SMC = PMC +
This bargaining processMD
will
until
theissocially
The gain
to society
is area,
this area,
Thecontinue
gain
to society
this
level.
the efficient
difference
between
the difference
between
(PMB(PMB
PMC)
PMC)
andand
MDMD
for for
thethe
firstsecond
unit. unit.
Price
of steel
p2
S = PMC
The
If the
reason
fisheryishad
because
property
any
rights,
steel itproduction
would initially
makes
impose
the
p1
zero
fishery
steelworse
production.
off.
MD
Thus,
While
But
While
there
itthe
is possible
is
fishery
the
still
room
fishery
room
suffers
to
forbargain.
suffers
to
the
bargain.
only
steel
the
Thus,
itThere
is
possible
for
the
steel
a The
modest
firm
same
steel
to steel
“bribe”
amount
damage
firm
firm
gets
the
of
gets
fishery
as
damage.
a lot
from
ainbit
ofinthe
less
firm
toThe
“bribe”
the
fishery
order
surplus
surplus
to produce
from
from
first
the
the
the
unit.
first
second
next
unit.
unit.
unit.
order
to
produce
the
first
unit.
0
Figure 5
1
2
Q2
Q1
D = PMB
SMB
QSTEEL
Negative Production Externalities and Bargaining:
Giving the Fish People Property Rights
SMC = PMC +
MD
Price
of steel
S = PMC
This bargaining process will
The gain gain
to society
is this
the
society
is area,
this area,
continueThe
until thetosocially
If the
This
steel
levelfirm
of
production
had property
difference
between
MD and MD
(PMB
the
difference
between
and
efficient
level.
While
While
the
steel
the
steel
firm
firm
suffers
suffers
a
rights,
maximizes
it would
the
consumer
choose
and unit.
PMC)
byinitially
cutting
another
(PMB-PMC)
byloss
cutting
back 1 unit.
only
larger
a
modest
loss
in
profits.
in profits.
producer
Q surplus.
.
p2
1
p1
MD
The
Thus,
The
Thus,
fishery
it is
fishery
itpossible
gets
is possible
gets
the for
same
a lot
the
forofthe
fishery
surplus
fishery
surplus
toas“bribe”
to
cutting
from
“bribe”
the
cutting
back
the
steel
from
steel
back
firmfirm
D=PMB=SMB
to
steel
cutthe
production
back
first
toanother
cut
unit.
back.
by unit.
one unit.
0
Figure 6
Q2
Q1
QSTEEL
Negative Production Externalities and Bargaining:
Steel Producers Have Property Rights
SMC=PMC+MD
S=PMC+tax
S=PMC
Price
of steel
The socially optimal level of
production, Q2, then maximizes
profits.
The steel firm initially produces
at QImposing
of PMC
Imposing
aatax
taxequal
shifts
to
thethe
PMC
MD
1, the intersection
and
PMB.curve
shifts
curve
the
upward
PMC
and reduces
such that
steel
it equals
production.
SMC.
p2
p1
D = PMB =
SMB
0
Figure 7
Q2
Q1
Corrective (“Pigouvian”) Taxation
QSTEEL
SMC = PMC + MD
S = PMC
Price
of steel
p2
The
Yet firm
the government
has an incentive
couldto
simply require
produce
it toQproduce
no
1.
more than Q2.
p1
D = PMB =
SMB
0
Figure 9
Q2
Q1
Quantity Regulation
QSTEEL
TheTable
U.S. is2 currently responsible
for nearly 25% of the planet’s
carbon dioxide emissions.
Developing counties like China
and India emit large quantities of
Japan contributes
only 5% of
greenhouse
gasses.
annual emissions.
1600
1400
1200
1000
800
600
400
NORTH KOREA
THAILAND
TAIWAN
TURKEY
INDONESIA
SPAIN
POLAND
BRAZIL
IRAN
SOUTH AFRICA
UKRAINE
AUSTRALIA
FRANCE
SAUDI ARABIA
MEXICO
SOUTH KOREA
ITALY
CANADA
UNITED KINGDOM
GERMANY
INDIA
JAPAN
RUSSIAN FED.
0
CHINA
200
UNITED STATES
Millions of Metric Tons of Carbon
Top 25 Fossil Fuel CO 2 Emitters in 2000