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18 Cards in this Set
- Front
- Back
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negative externalities (external costs) |
costs to society from your private choice that affect others, but that you do not pay |
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positive externalities (external benefits) |
benefits to society from your private choice that affect others, but that others do not pay you for |
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free riders |
people who consume products or services without paying |
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property rights |
government's legal protection of property and enforcement of contracts |
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reason for externalities causing market failure |
lack of clear property rights EX: no one owns the air that we pollute |
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marginal social cost |
marginal private cost directly paid by producers (MC) + marginal external cost imposed on others EX: company pays for power and workers but emits pollution |
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marginal social benefit |
marginal private benefit directly received by consumers (MB) + marginal external benefit EX: people get education make higher salary but commit less crime |
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social costs |
= Private (opportunity) costs + External (opportunity) costs |
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social benefits |
= Private benefits + external benefits |
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emissions taxes |
tax to pay for the external costs of emissions |
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carbon tax |
emissions tax on carbon-based fossil fuels |
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internalize the externality |
transform external costs into costs the producer must pay to the government |
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cap-and-trade system |
limits the quantity of emissions businesses can release into the environment |
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public goods |
provide external benefits consumed simultaneously by everyone; no one can be excluded EX: lighthouse, national defence |
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free-rider problem |
markets underproduce products and services with positive externalities |
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smart choice for quantity ouput |
Marginal Social Cost = Marginal Social Benefit |
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subsidies |
payment to those who create positive externalites |
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public provision |
government provision of products or services with positive externalities, financed by tax revenue |
