The transformation space analyzed in chapter 3 describes the production possibilities of two private goods and the public good “environmental quality” All combinations of the transformation space can be attained. But which set of outputs should be sought? In order to answer this question, we must introduce value judgments that eventually allow us to determine the desired set of outputs.
KeywordsAbatement Cost Pareto Optimum Shadow Price Competitive Equilibrium Marginal Abatement Cost
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