Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
9 Cards in this Set
- Front
- Back
Externality
|
The uncompensated impact of one persons actions on the well being of a bystander
|
|
Internalizing the externalities
|
Altering incentives so that people take account of the external effects of their actions
|
|
Coase Theorem
|
The proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own
|
|
Transaction Cost
|
The costs that parties incur in the process of agreeing to and following through on a bargain
|
|
Corrective Tax
|
A tax designed to induce private decision makers to take account of the social costs that arise from a negative externality
|
|
What Quantity of aluminum should be produced by benevolent social planner?
|
Planner wants to maximize the total surplus derived from the market- the value to consumers of aluminum minus the cost of producing aluminum. The cost of producing aluminum includes the external costs of the pollution. The planner would choose the level of aluminum production at which the demand curve crosses the social-cost curve (private and external cost). The intersection determines the optimal amount of aluminum from the standpoint of society as a whole.
|
|
To remedy the problem of negative and positive externalities, the government....
|
can internalize the externality by taxing goods that have negative externalities and subsiding goods that have positive externalities
|
|
Technology Spillover
|
The impact of one firms research and production efforts on other firms research and production efforts on other firms' access to technological advance (a potentially important type of positive externality)
|
|
Industrial Policy
|
Government intervention in the economy that aims to promote technology-enhancing industries
|