CHAPTER 17 EXTERNALITIES

Question 1

Consumption externalities or external benefits of consumption.

Answer 1

When social costs of consumption are different from the private costs of consumption. If social benefits exceed private benefits, then there are positive consumption externalities. If social benefits are less than private benefits, then there are negative consumption externalities

Question 2

Externality or spillover effect

Answer 2

The difference between social cost and private costs and benefits. If net social cost (social cost minus social benefit) is greater than net private cost (private cost minus private benefit), than a negative externality or external cost exists. If new social benefit is greater than net private benefit, a positive externality or external benefit exists.

Question 3

Marginal social and private costs and benefits

Answer 3

The social and private costs and benefits of the last unit either produced or consumed.

Question 4

Private cost and benefits

Answer 4

The cost or benefit of an activity to an individual economic unit such as a consumer or a firm.

Question 5

Production externalities or external benefits production

Answer 5

When the social cost of production are different from the private cost of production. If social costs exceed the private costs, then there are negative production externalities. If social costs are less that private costs then there are positive production externalities.

Question 6

Social cost and benefits

Answer 6

The cost or benefit of an activity to society as a whole