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13 Cards in this Set
- Front
- Back
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Positive Externality shifts the ____ curve to the ____ |
demand; right |
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Negative Externality shifts the ___ curve to the ____ |
supply; left |
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When a negative externality occurs Marginal social _____ is greater than marginal social _____ |
MSC > MSB b/c Quantity of the market is greater than the Efficient quantity |
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When a positive externality occurs Marginal social _____ is greater than marginal social ______ |
MSB > MSC b/c Quantity of the market is less than the efficient quantity |
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What is a Public good? give example |
A good that is both nonrival and nonexcludable
(police protection) |
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Common Resource |
A good that is rival but not excludable ( Fish in the ocean) |
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Coase theorem |
If transaction costs are low, private bargaining will result in an efficient solution to the problem of externalities |
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Market failure |
a situation in which market fails to produce the efficient level of outcome |
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Property rights |
The rights of individuals of businesses have to the exclusive use of their property, including the right to buy or sell it |
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Coase theorem |
-if a trade in an externality is possible -and there are no transaction costs bargaining will lead to an efficient outcome regardless of the initial allocation of property rights |
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Transaction Costs |
The costs in time and other resources that parties incur in the process of agreeing to and carrying out an exchange of goods or services |
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Negative Externality results |
Decrease in supply Qm > Qeff MSC>MSB |
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Positive Externality results |
Increase in Demand Qeff > Qm MSB>MSC |
