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An important class of externalities to which attention has recently been directed is called information externalities. The information produced by one individual or firm generates benefits for others. The success of an oil well on one tract of land increases the likelihood of oil's being found on an adjacent tract, and hence increases the value of that tract. a) Can you think of other examples of information externalities? b) What are the likely consequences of information externalities for the efficiency of resource allocations? c) Discuss the possibilities of private market solutions to these problems.

An important class of externalities to which attention has recently been directed is called information externalities. The information produced by one individual or firm generates benefits for others. The success of an oil well on one tract of land increases the likelihood of oil's being found on an adjacent tract, and hence increases the value of that tract. a) Can you think of other examples of information externalities? b) What are the likely consequences of information externalities for the efficiency of resource allocations? c) Discuss the possibilities of private market solutions to these problems.

Principles of Microeconomics
Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter22: Frontiers Of Microeconomics
Section: Chapter Questions
Problem 8PA
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An important class of externalities to which attention has recently been directed is called information externalities. The information produced by one individual or firm generates benefits for others. The success of an oil well on one tract of land increases the likelihood of oil's being found on an adjacent tract, and hence increases the value of that tract. a) Can you think of other examples of information externalities? b) What are the likely consequences of information externalities for the efficiency of resource allocations? c) Discuss the possibilities of private market solutions to these problems.
Transcribed Image Text:An important class of externalities to which attention has recently been directed is called information externalities. The information produced by one individual or firm generates benefits for others. The success of an oil well on one tract of land increases the likelihood of oil's being found on an adjacent tract, and hence increases the value of that tract. a) Can you think of other examples of information externalities? b) What are the likely consequences of information externalities for the efficiency of resource allocations? c) Discuss the possibilities of private market solutions to these problems.
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