P.27. Microeconomic policy.

Intervention to regulate externalities:

1.     Fees and subsidies

2.     Regulation-no incentive to reduce pollution

3.     A total ban- results in loss of welfare usually

4.     A total ban of pollution- can also result in loss of welfare

5.     Nationalisation- cost inefficiency + administration costs

6.     A bargaining solution (coarse theorem)

Practical problems providing public goods:

1.     Free riding

2.     Calculating SMC and SMB

3.     Non-excludability and rivalry(consumption of 1 does not prevent that of other)

There is no evidence that welfare economics would bring the equality with it.