【正文】 There are three main methods that the government uses to cope with external costs: ? Taxes ? Emission charges ? Capandtrade 169。 2020 Pearson AddisonWesley Negative Externality: Pollution CapandTrade Each firm is assigned a permitted amount of pollution per period and firms trade permits. The market price of a permit confronts polluters with the social marginal cost of their actions and leads to an efficient oute. This method was used successfully to decrease lead pollution in the United States. 169。 2020 Pearson AddisonWesley The Tragedy of the Commons The Overuse of a Common Resource Figure shows why overfishing occurs. The supply is the marginal private cost curve, MC. The demand is the marginal social benefit curve, MSB. Market equilibrium occurs at 800,000 tons per year and $10 a pound. 169。 2020 Pearson AddisonWesley The Tragedy of the Commons Production Quotas By setting a production quota at the efficient quantity, the resource might be used efficiently. Figure shows the profit on the marginal ton of fish. A fisher who cheats will increase his profit. There is an incentive to overfish. 169。 2020 Pearson AddisonWesley 18 MARKETS FOR FACTORS OF PRODUCTION 169。 2020 Pearson AddisonWesley –Market for Labor Services –Labor services are the physical and mental work effort that people supply to produce goods and services. –A labor market is a collection of people and firms who trade labor services. –The price of labor services is the wage rate. –Most labor markets have many buyers and many sellers and are petitive. In these labor markets, the wage rate is determined by supply and demand. The Anatomy of Factor Markets 169。 2020 Pearson AddisonWesley –The demand for a factor of production is a derived demand—it is derived from the demand for the goods that it is used to produce. –The quantities of factors of production demanded are a consequence of firms’ output decisions. –A firm hires the quantities of factors of production that maximize its profit. –The value to the firm of hiring one more unit of a factor of production is called the value of marginal product. The Demand for a Factor of Production 169。 2020 Pearson AddisonWesley ?The firm maximizes its profit by hiring the quantity of labor at which VMP = the wage rate. ?If VMP exceeds the wage rate, the firm can increase profit by employing one more worker. ?If VMP is less than the wage rate, the firm can increase profit by firing one worker. ?Only if VMP equals the wage rate is the firm maximizing profit. The Demand for a Factor of Production 169。 2020 Pearson AddisonWesley ?The Price of the Firm’s Output ?The higher the price of a firm’s output, the greater is the firm’s demand for labor. ?The price of output affects the demand for labor through its influence on the value of marginal product of labor. ?If the price of the firm’s output increases, the demand for labor increases and the demand for labor curve shifts rightward. The Demand for a Factor of Production 169。 2020 Pearson AddisonWesley ?The Market Supply of Labor –An Individual’s Labor Supply Decision –People allocate their time between leisure and labor and this choice, which determines the quantity of labor supplied, depends on the wage rate. –A person’s reservation wage is the lowest wage rate for which he or she is willing to supply labor. –As the wage rate rises above the reservation wage, the household changes the quantity of labor supplied. Labor Markets 169。 2020 Pearson AddisonWesley –Individual’s Supply of Labor Curve –At low wage rates the substitution effect dominates the ine effect, so a rise in the wage rate increases the quantity of labor supplied. –At high wage rates the ine effect dominates the substitution effect, so a rise in the wage rate decreases the quantity of labor supplied. –The labor supply curve slopes upward at low wage rates but eventually bends backward at high wage rates. Labor Markets 169。 2020 Pearson AddisonWesley ?Labor Market Equilibrium with a Union –Unions try to restrict the supply for union labor and raise the wage rate. –But this action also decreases the quantity of labor demanded. –So the union tries to increase the demand for labor. Labor Markets 169。 2020 Pearson AddisonWesley –The monopsony pays the lowest wage rate for which that quantity of labor will work. –Compared to a petitive labor market, the monopsony employs fewer workers and pays a lower wage rate. Labor Markets 169。 2020 Pearson AddisonWesley –For more than 150 workers, the supply of labor curve is S and the marginal cost of labor curve is MCL. –With the minimum wage, the monopsony increases the quantity of labor hired and pays a higher wage rate than with no minimum wage rate. Labor Markets