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6 Cards in this Set
- Front
- Back
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In welfare economics, what does the demand curve show? |
Private Value |
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In welfare economics, what does the supply curve show? |
Private cost |
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Approach for externality policies which regulate the behavior directly. |
Comand and control policies |
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Approach for externality policies which provide incentives so that private decision-makers will choose to solve the problem on their own. |
Market-based policies |
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The Coase Theorem |
If private parties can costlessly bargain over the allocation of resources, they can solve the externalities probhlem on their own. |
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Why doesnt coase theorem work in many situations? |
Due to Transaction Costs, the costs parties incur in the process of agreeing ot and following through on a bargain. These costs may make it impossible to reach a mutually beneficial agreement.
Stubbornness is also an issue because parties might hold out for a better deal
Coordinational problems also exist if the # of parties is large and its hard to unanimously bargain. |
