Nt1310 Unit 2

In general, the reading and the AP textbook both contained the same economic concepts, but they sometimes used different terminology and economic models to explain them. One similarity was the concept that ‘everything is scarce and that all individual and firms seek to maximize their utility and benefits. Unit 3 started with an interesting historical overview of workdays and how it had decreased throughout the world due to technological factors and norms. The highlight of the Unit was explaining the interrelation between the concept of utility maximization and the feasible frontier, rather than separately. It explains how we can determine a person’s preferences of how much hours they want to work (or study) simply by setting the marginal

Some provided examples of externalities were second-hand smoking, pesticide, and the post-antibiotic crisis. One of the remedies for a negative externality was compensation, which for one of the examples--the banana plantation owners and fishermen--I felt was unrealistic and weak. The idea was to reduce the negative externalities or the marginal social cost of polluting the fishing waters by reducing the output of bananas, which is compensated with money. It eventually reduces the output of bananas to the point in which the marginal social cost equals the market price for bananas. The transaction would work if both groups are in agreement and there are no barriers to information. That’s just unrealistic. Since the pesticide for growing bananas is legal and the fishermen are asking the plantation owners for help, the fishermen have considerably less bargaining power, making compensation difficult to execute. In addition, the pesticide is also a destroyer of environments, fishermen industries, and human health, so I would expect the the marginal social cost to be way higher. No bother placing a tax on it for monetary gain or for Pareto efficiency; rather, it’s better to ban it due to huge long-term negative