Externalities Flashcards
1
Q
What are externalities?
A
Costs and benefits to third parties who are not part of the price mechanism.
2
Q
What are private costs?
A
Private costs are the costs paid for directly by the produce or consumer in a transaction.
3
Q
What are the private costs of a producer?
A
Wages,rent,raw materials and energy
4
Q
What are the private costs for a consumer?
A
Price paid for the product or service
5
Q
What are external costs?
A
Costs to third parties- not part of price mechanism
6
Q
what are examples of external costs of production
A
Air pollution
Noise pollution
Deforestation of the rainforest to grow crops
7
Q
What are examples of external costs of consumption
A
Passive smoking
Overeating by individuals
8
Q
A
