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The document discusses the economics of pollution and optimal pollution levels. It defines pollution based on both physical effects on the environment and human reactions. The optimal level of pollution is where the marginal net private benefit curve intersects with the marginal external cost curve. This represents the point where the private benefit of pollution equals the external social cost. The document also examines different approaches to achieving the optimal pollution level, such as pollution taxes, emissions standards, and bargaining between polluting firms and affected communities.
The document discusses the economics of pollution and optimal pollution levels. It defines pollution based on both physical effects on the environment and human reactions. The optimal level of pollution is where the marginal net private benefit curve intersects with the marginal external cost curve. This represents the point where the private benefit of pollution equals the external social cost. The document also examines different approaches to achieving the optimal pollution level, such as pollution taxes, emissions standards, and bargaining between polluting firms and affected communities.
The document discusses the economics of pollution and optimal pollution levels. It defines pollution based on both physical effects on the environment and human reactions. The optimal level of pollution is where the marginal net private benefit curve intersects with the marginal external cost curve. This represents the point where the private benefit of pollution equals the external social cost. The document also examines different approaches to achieving the optimal pollution level, such as pollution taxes, emissions standards, and bargaining between polluting firms and affected communities.
The optimal level of pollution The economic definitions of pollution is dependent upon both some physical effect of waste on the environment and a human reactions to the physical effect. The physical effect
Biological (Species change, ill- health) Chemical (effect of acid rain on building surfaces) Noise
The Human reaction
Distaste Unpleasantnees Distrees Concern Anxiety Loss of welfare Optimal Eksternality We are now in position to identify of the optimal of eksternality. It is where the two curves intersect, where MNPB (Marginal Net Private Benefit)=MEC (Marginal Eksternal Cost)
Q MNPB
MEC Q MEC Optimal Eksternality
Q* MNPB Q MEC Economic definition of optimal pollution MNPB=MEC A B C D Manfaat=A+B+C Biaya=B+C+D Manfaat sosial=A-D Manfaat=A+B Biaya=B Manfaat sosial=A Optimal pollution levels with positive asssimilative capacity
Wa Cost, Benefit Q MEC Level Economic Activity (Q) MNPB=MEC W* Q Q* Qa 0 Optimal pollution by bargaining
Q* MNPB Q MEC Level of Economic activity (Q) MNPB=MEC A B C D 0 Optimal pollution tax (Pigovian Tax)
Q* MNPB Q MEC MNPB-t* MNPB=MEC A B C D 0 NSB=PQ-C(Q)-EC(Q) NSB/Q=P-C/Q-EC/Q=0 Maximasing NSB P=C/Q+EC/Q=SC/Q P-C/Q=EC/Q NPB/Q=EC/Q MNPB=MEC t*=EC/Q t* Pollution charges and abatement costs
MAC2 MAC1 MEC Pollution abatement Cost W1 Q W2 0 Pollutio n t* Optimal pollution: the abatement cost-eksternal cost approach MAC Pollution charges and abatement costs
MEC a-b Cost a b 0 Pollution Optimal pollution: the abatement cost-eksternal cost approach MAC MNPB MAC<MNPB Which means it is cheaper abatment pollution than reduce output Three incidence of a pollution tax
MNPB Cost, Benefit MEC Level Economic Activity (Q) Q Q* A 0 a b c t* Emissions The inefficiency of standard
Wa Cost, Benefit Wb MEC Level Economic Activity (Q) MNPB=MEC W* Q Q* Qa 0 Penalty P* P S Pollution Equivalence of tax and standard
a Cost, Benefit e MEC Level Economic Activity (Q) b Q Q* Q 0 tax d c S MNPB true MNPB false Standard versus tax
Cost, Benefit MEC Polluting activity Q Q* Q 0 tax MNPB true MNPB false Standard prefered Standard versus tax