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9 Cards in this Set

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

Social costs are higher then private costs
What is potential welfare gain?
Where the social benefit is higher than the private benefit, yet has been ignored.