Chapter 17 Flashcards
Marginal social cost of pollution
The additional cost imposed on society as a whole by an additional unit of pollution
Marginal social benefit of pollution
The additional gain to society as a whole from an additional unit of pollution
Socially optimal quantity of pollution
The quantity of pollution that society would choose if all the costs and benefits of pollution were fully accounted for
External cost
An uncompensated cost that an individual or firm imposes on others
External benefit
A benefit that an individual or firm confers on others without receiving compensation
Externalities
external costs and benefits
external costs =
negative externalities
external benefits =
positive externalities
Coase theorem
Even in the presence of externalities an economy can always reach an efficient solucient as long as transaction costs are suffireintly low
transaction costs
the costs to individuals to making a deal
Internalize the externality
When individuals take external costs or benefits into account
environmental standards
Rules that protect the environment by specifying actions by producers and consumers
emissions tax
A tax that depends on the amount of pollution a firm produces
Pigouvian taxes
Taxes designed to reduce external costs
Tradable emissions permits
Liscences to emit limited quantities of pollutants that can be bought and sold by polluters
