Missing Markets as an Explanation for Unaccounted Social Costs
Externalities can be understood as a consequence of missing markets for certain inputs. When no market exists for resources like a quiet environment or biodiversity, firms can use them without payment, effectively treating their price as zero. This leads to the final product's price, such as for flights or tropical hardwood, being artificially low because it only reflects the private costs of paid inputs, not the full social cost. An alternative explanation for these unaccounted costs is the absence of enforceable property rights.
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CORE Econ
Ch.10 Market successes and failures: The societal effects of private decisions - The Economy 2.0 Microeconomics @ CORE Econ
The Economy 2.0 Microeconomics @ CORE Econ
Introduction to Microeconomics Course
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