1.3.2

Question 1

Private costs

Answer 1

The costs to economic agents involved directly in an economic transaction

Question 2

Social costs p

Answer 2

Calculated by the private costs plus external costs
Cost to society as a whole

Question 3

Social optimum position

Answer 3

MSC= MSB point of maximum welfare
The social costs made from producing the last unit of output is equal to the social benefit derived from consuming the unit of output

Question 4

When do external costs occur

Answer 4

When a good is being produced or consumed, such as pollution
The market equilibrium ignores these negative externalities, leads to over-provision and under-pricing

Question 5

Deadweight welfare loss

Answer 5

Social costs>private benefits

Question 6

Welfare gain

Answer 6

Social benefits>social costs

Question 7

Government policies for negative externalities

Answer 7

ISRPPPP
Indirect taxes
Subsidies
Regulation
Provide the good directly
Provide information
Property rights
Personal carbon allowances