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Market Failure of air pollution

Market Failure of air pollution. By Young – Joo Kim. -Link- http://www.nzherald.co.nz/section/2/story.cfm?c_id=2&objectid=10522702 http://www.youtube.com/watch?v=TwM9_3thvss http://www.youtube.com/watch?v=e19VoA2SApM http://tvnz.co.nz/view/page/1229447. Identify the spillover. SMC1.

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Market Failure of air pollution

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  1. Market Failure ofair pollution By Young – Joo Kim

  2. -Link- • http://www.nzherald.co.nz/section/2/story.cfm?c_id=2&objectid=10522702 • http://www.youtube.com/watch?v=TwM9_3thvss • http://www.youtube.com/watch?v=e19VoA2SApM • http://tvnz.co.nz/view/page/1229447

  3. Identify the spillover SMC1 PMC=SMC Costs Deadweight loss PS PFM PMB QS QFM Output

  4. Why its market failure • If we assume that the factory (such as chemical, iron…) trying to maximise the profits, then producer only consider their own private costs and private benefits from their supply of production so they will produce at the output level QFM. However the socially efficient level of production after considering the spillover costs on third parties is Qs. I.e. In this example a free market would over produce because the film won’t take account of the negative spillover.

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