Econ: Chapter 5 – Flashcards

costs of labor, recycled, paper, energy, water etc costs incurred only by the producer

private costs (the company is part of society too) cost of cleaning up or suffering the polluted water

the marginal cost borne only by the producer of a good

the cost affecting someone who is not directly involved in the production of a good aka negative externality ex. pollution from an energy plant or second hand smoke or traffic congestion

the marginal cost of producing a good, including both the marginal private cost and any marginal external cost MSC=MPC+MEC

the marginal benefit received only by the consumer of a good

a benefit affecting someone who is not directly involved in the consumption of a good aka positive externality ex. vaccinations or a college education

the marginal benefit from consuming a good MSB=MPB=MEB

when goods are produced up to the point where the marginal social benefit of the last unit produced equals its marginal social cost MSB=MSC

a situation in which the market fails to produce allocatively efficient level of output MSB/=/MSC if there are externalities in a market then the market equilibrium may not be allocatively efficient

in general: the costs in time and other resources incurred in the process of bargaining or exchanging goods in context of externalities: the costs of negotiating a solution to an externality problem

the argument that is transaction costs are low private negotiation will resolve the problem of externality ex. neighbors screeching turbine vent

a tax designed to induce an efficient level of output in the presence of negative externalities

a subsidy designed to induced an efficient level of output in presence of positive externalities

when one person's consumption of a good interferes with someone else's consumption of that good

when someone who does not pay for a good can be prevented from consuming that good

rival and excludable

rival and non excludable

non rival and non excludable

the tendency for common resources to be over used

benefitting from a good without paying for it

shift supply curve MB