4.3.2 externalities Flashcards
1
Q
How are social costs calculated?
A
Private Costs + External Costs
2
Q
What is the calculation for external costs?
A
Difference between Private Costs and Social Costs.
3
Q
What is the calculation for social benefits?
A
Private Benefits + External Benefits
4
Q
What is the calculation for external benefits?
A
Difference between private and social benefits.
5
Q
How does market equilibrium lead to over-provision and under-pricing of demerit goods/external costs?
A
It ignores these negative externalities.
6
Q
What is there excess of at free market equilibrium, with negative externalities?
A
Social costs over benefits.
