Marginal External Cost in a General Utility Model
In a general utility model where preferences are not necessarily quasi-linear, the marginal external cost (MEC) is the marginal reduction in an individual's utility caused by an incremental increase in the externality-producing activity (Q). Mathematically, it is expressed as . A key distinction from quasi-linear models is that this MEC is generally a function of both the activity level (Q) and the affected individual's other income (). This means, for instance, that the marginal harm experienced by fishermen from pollution may vary depending on whether their other income is high or low.
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CORE Econ
Introduction to Microeconomics Course
Ch.10 Market successes and failures: The societal effects of private decisions - The Economy 2.0 Microeconomics @ CORE Econ
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