Externalities Flashcards
How is chewing gum a negative externality
- Gum under table -> more work for cleaners
- Single use wrappers -> Bad for environment
MPC
marginal private cost
MPB
Marginal private benefit
MSC
Marginal social cost
Is MPC internal
Yes
Is MPB internal
Yes
Is MSC internal
No - external
Where would MPC be on a negative externalities supply and demand graph
At supply
Where would MPB be on a negative externalities supply and demand graph
At demand
Where would MSC be on a negative externalities supply and demand graph
A new line starting at the bottom of supply line and going up with a steeper gradient
Where is the externalities on a negative externalities supply and demand graph
Drawing up from where supply and demand cross until it meets new MSC line and shade in to the left of drawn up line
Where would MSB be on a positive externalities supply and demand graph
Starting at the top of the demand line and going down with a less steep gradient
What is MSB
Marginal social benefit
Where is the externalities on a positive externalities supply and demand graph
Draw up from where supply and demand meet up to the MSB line and shade to the right of the line
