BM3 externalities Flashcards
What are private costs ?
Producer’s cost of production
What is S in these diagram ?
S = MPC = MSC
What is D in these diagram ?
D = MPB = MSB
What is social cost ?
Private cost + External Cost
What are Private Benefits ?
Individual consumer benefits
What is Social Benefits ?
Private Benefit + External Benefits
What is Private Optimum ?
MPC =MPB
What is Social Optimum ?
MSC = MSB
What are negative externalities in production ?
Costs on third parties as a a result of the actions of producers
How are negative externalities in production shown in the diagram ?
MSC > MPC
How to get welfare triangle right every time ?
Tip of triangle points to Social Optimum
What is the result of negative externalities in production ?
Over production
What are negative externalities in Consumption ?
Costs on third parties as a a result of the actions of consumer.
How are negative externalities in consumption shown in the diagram ?
MPB >MSB
What is the result of negative externalities in consumption?
Over Consumption
What are positive externalities in Consumption ?
Benefits on third parties as a a result of the actions of consumer.
How are positive externalities in consumption shown in the diagram ?
MSB > MPB
What is the result of positive externalities in consumption?
Under Consumption
What are positive externalities in Production ?
Benefits on third parties as a a result of the actions of producers.
What are examples of positive externalities in Production ?
In-work training , R&D
How are positive externalities in production shown in the diagram ?
MPC > MSC
What is the result of positive externalities in production ?
Under Production
