75: Externalities and Public Policy Flashcards
environmental standards
rules that protect the environment by specifying limits or actions for producers and consumers
emissions tax
taxes that depend on the amount of pollution a firm produces, thus allocating most of the reduction to the firms with the lowest cost of reduction
pigouvian taxes
taxes designed to reduce external costs
tradable emissions permits
licenses to emit limited quantities of pollutants that can be bought and sold by polluters
–> those who can easily reduce emissions will sell some of their permits to those who find it more difficult
cap and trade programs
creates a market for the right to produce
marginal external benefit
difference between MBconsumer and MBsociety
pigouvian subsidy
payment designed to encourage activities that yield external benefits
technology spillover
external benefit that results when knowledge spreads among individuals and firms
marginal external cost
difference between MSC and MPC
network externality
when the value of a good to an individual is greater when other people use it
congestion
negative network externality