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9 Cards in this Set
- Front
- Back
What is an externality?
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A cost or a benefit that is external to a market transaction, and is thus not reflected in market prices
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What is a private cost?
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A cost incurred by a firm or consumer as part of its production of other economic activitiy
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What is an external cost?
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Costs involved in the production or consumption of a good or service experienced by a third party
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What is a social cost?
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Private costs + external costs
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What is an external benefit?
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Benefits that may occur in the production or conumption and experienced by a third party
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What is a private benefit?
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Benefits a consumer will experience from conuming a good or service
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What is a social benefit?
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Private benefits + external benefits
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What is welfare loss?
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Where external benefits to society have been ignored.
Social costs are higher then private costs |
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What is potential welfare gain?
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Where the social benefit is higher than the private benefit, yet has been ignored.
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