MARKET FAILURE: PUBLIC GOODS, PUBLIC BADS, AND EXTERNALITIES C H A P T E R 5 MARKET FAILURE: PUBLIC GOODS, PUBLIC BADS, AND EXTERNALITIES ENVIRONMENTAL ECONOMICS – 2e Charles D. Kolstad Copyright © 2011 by Oxford University Press, Inc.

FIGURE 5.1 Illustration of an open access resource. ENVIRONMENTAL ECONOMICS – 2e Charles D. Kolstad Copyright © 2011 by Oxford University Press, Inc.

FIGURE 5.2 Production possibilites with an externality, steel and laundry. ENVIRONMENTAL ECONOMICS – 2e Charles D. Kolstad Copyright © 2011 by Oxford University Press, Inc.

FIGURE 5.3 Indifference curves with consumption externality. ENVIRONMENTAL ECONOMICS – 2e Charles D. Kolstad Copyright © 2011 by Oxford University Press, Inc.

FIGURE 5. 4 Pareto relevance of externality FIGURE 5.4 Pareto relevance of externality. (S0,L0), steel and laundry production without coordination; (S1,L1), steel and laundry production with firms merged; Y1, value of output of merged firm; Y0 value of output without coordination; (ps, pL), prices of steel and laundry. ENVIRONMENTAL ECONOMICS – 2e Charles D. Kolstad Copyright © 2011 by Oxford University Press, Inc.

produced of nonrival good. FIGURE 5.7 Supply and demand, rival vs. nonrival goods, (a) individual demands; (b) aggregate demand, rival good; (c) aggregate demand, nonrival good; (d) efficient provision. QR, quantity produced of rival good; QN, quantity produced of nonrival good. ENVIRONMENTAL ECONOMICS – 2e Charles D. Kolstad Copyright © 2011 by Oxford University Press, Inc.

ENVIRONMENTAL ECONOMICS – 2e Charles D. Kolstad Copyright © 2011 by Oxford University Press, Inc.

charge; q1, number of visitors when price is p1. FIGURE 5.9 Demand for visits to nonrival, excludable parks. q0, number of visitors with no admission charge; q1, number of visitors when price is p1. ENVIRONMENTAL ECONOMICS – 2e Charles D. Kolstad Copyright © 2011 by Oxford University Press, Inc.