【正文】 is less than MSC, so the market produces an inefficient quantity of the good. At the efficient quantity of the good, MSC = MSB. With no regulation, the market produces too much of the good and creates a deadweight loss. Negative Externality: Pollution 169。 2020 Pearson AddisonWesley Negative Externality: Pollution Production and Pollution: How Much? In the market for a good with an externality that is unregulated, the amount of pollution created depends on the equilibrium quantity of the good produced. 169。 2020 Pearson AddisonWesley Negative Externality: Pollution Marginal social cost (MSC) is the marginal cost incurred by the entire society—by the producer and by everyone else on whom the cost falls. Marginal social cost is the sum of marginal private cost and marginal external cost. MSC = MC + Marginal external cost We express costs in dollars but remember that the dollars represent the value of a fone opportunity. Marginal private cost, marginal external cost, and marginal social cost increase with output. 169。 2020 Pearson AddisonWesley Negative Externality: Pollution Many scientists believe that carbon dioxide emissions are a major cause of global warming and climate change. The effects of pollution mean that production and consumption decisions impose costs that are not taken fully into account when decisions are made. You are now going to see how economists analyse these decisions and solve the pollution problem. 169。 2020 Pearson AddisonWesley Negative Externality: Pollution Sources of Pollution Economic activity pollutes air, water, and land, and these individual areas of pollution interact through the ecosystem. The three biggest sources of pollution are road transportation, electricity generation, and industrial processes. 169。 2020 Pearson AddisonWesley We burn huge quantities of fossil fuels—coal, natural gas, and oil—that cause acid rain and global warming. We dump toxic waste into rivers, lakes, and oceans. These environmental issues are simultaneously everybody’s problem and nobody’s problem. The fish stocks in the world’s oceans are not owned by anyone. They are mon resources that everyone is free to use. But we are overusing our fish stocks and brings some species into extinction. What can be done to conserve the world’s fish stocks? 169。17 ECONOMICS OF THE ENVIRONMENT 169。 2020 Pearson AddisonWesley 169。 2020 Pearson AddisonWesley Negative Externality: Pollution An externality is a cost or benefit that arises from production and falls on someone other than the producer, or a cost or benefit that arises from consumption and falls on someone other than the consumer. A negative externality imposes an external cost. 169。 2020 Pearson AddisonWesley Negative Externality: Pollution Effects of Pollution While the facts about the sources and trends in air pollution are not in doubt, there is disagreement about the effects of air pollution. The least controversial is acid rain caused by sulphur dioxide and nitrogen oxide emissions from coal and oilfired generators of power stations. Acid rain begins with air pollution, and it leads to water pollution and damages vegetation. 169。 2020 Pearson AddisonWesley Negative Externality: Pollution Private Cost and Social Cost of Pollution A private cost of production is a cost that is borne by the producer. Marginal private cost (MC) is the private cost of producing one more unit of a good or service. An external cost of production is a cost that is not borne by the producer but is borne by others. Marginal external cost is the cost of producing one more unit of a good or service that falls on people other than the producer. 169。 2020 Pearson AddisonWesley External Cost and Output Figure illustrates the MC curve, the MSC curve, and marginal external cost as the vertical distance between the MC and MSC curves. Negative Externality: Pollution 169。 2020 Pearson AddisonWesley Figure shows the equilibrium in an unregulated market with an external cost. The quantity of the good produced is where marginal private cost (MC) equals marginal social benefit (MSB). Negative Externality: Pollution 169。 2020 Pearson AddisonWesley Negative Externality: Pollution Property Rights Sometimes externalities arise because of the absence of property rights. Property rights are legally established titles to the ownership, use, and disposal of factors of production and goods and services that are enforceable in the courts. 169。 2020 Pearson AddisonWesley Negative Externality: Pollution The Coase Theorem The Coase theorem is a proposition that if property rights exist, only a small number of parties are involved, and transactions costs (defined below) are low, then private transactions are efficient. There are no externalities because all parties take into a