Public Economics Lectures Part 1: Introduction

Weitzman 1974: Market for Pollution Reduction
Let q denote pollution reduction starting from private market eq.,
where q = 0.
Let B(Q) denote social benefits of pollution reduction
Let C (Q) denote social costs.
In simple model above:
MB of pollution reduction is constant, B ′ (Q) = d.
MC given by loss in surplus from producing one less car: u ′ (x) − c ′ (x).
More generally, MC should be interpreted as cost of reducing pollution
through cheapest method (e.g. cleaner plants)
Public Economics Lectures () Part 7: Public Goods and Externalities 95 / 138