Externalities Flashcards
1
Q
What is an externality
A
it is a cost or benefit that is experienced by a third party who is external to an exchange.
2
Q
What is a negative externality
A
a cost that is suffered by a third party as a result of an economic transaction
3
Q
examples of negative consumption externalities
A
- alcohol = increased crime
- waste = landfills/pollution
- smoking = second hand smoke
4
Q
examples of negative production externalities
A
- coal = pollution
- oil = spills
- pesticides = chemicals in food
5
Q
examples of positive consumption externalities
A
- health = healthy society
- school = educated society
- public transport = less pollution
6
Q
examples of positive production externalities
A
- beehives = helping environment
- research and development = vaccines
- flood defences = protected properties
7
Q
What is a positive externality
A
a benefit that is enjoyed by a third party as a result of an economic transaction
8
Q
What is fixed cost and variable cost
A
fixed - rent etc
variable - wages etc
9
Q
What is the link between all: MPB, MSB, MPC, MSC
A
MPC = MSC =S
MPB = MSB = D
