Externalities Flashcards
0
Q
If social benefits are greater than private benefits the good has …?
A
Positive externalities.
1
Q
What is an externality?
A
Externalities are third party effects arising from production and consumption of goods and services, for which no appropriate compensation or reward is paid.
2
Q
What is a demerit good?
A
A good which has negative externalities AND the consumer is unaware of the value of their private costs e.g. smoking in the 1950s
3
Q
What is a merit good?
A
A good which has positive externalities AND the consumer is unaware of the value of their private benefits e.g. vaccinations
4
Q
Which one of these graphs shows positive externalities and which one shows negative externalities?
A
A) negative externalities B) positive externalities
