CHAPTWR 11 Flashcards

1
Q

Social costs formula

A

= private (opportunity) costs +external (opportunity) costs

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2
Q

Social benefits formula

A

= private benefits + external benefits

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3
Q

When do externalities occur

A

When clear property rights are missing

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4
Q

What happens when externalities exist

A

Prices do not reflect all social costs and benefits

Markets fail to be Efficient

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5
Q

Efficient pollution

A

Balances additional environmental benefits of lower pollution with the additional opportunity costs of reduced living standards

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6
Q

Smart choices

A

MSc = Msb

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7
Q

Marginal social cost

A

Marginal private cost plus marginal external cost

Msc = marginal private cost directly paid by producers (MC)

+ marginal external cost imposed on others

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8
Q

Marginal social benefit

A

Marginal private benefit plus marginal external benefit

Msb = marginal private benefit directly received by consumers (MB)

+

Marginal external benefit employed by others

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9
Q

Government remedy market failures

A

Create social property rights to the environment

Making polluting illegal

Penalizing polluters

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