Externalities Flashcards
1
Q
Positive externalities of consumption
A
MSC
MPB welfare loss
2
Q
Negative externalities of consumption
A
MSC
MPB > MSB
< welfare gain
3
Q
Positive externalities of production
A
MSB
MPC unfulfilled cost
4
Q
Negative externalities of production
A
MSB
MPC > MSC
< overfilled cost
5
Q
Production externalities
A
Producers make decisions based of PC and disregard EC
6
Q
Consumption externalities
A
Consumers make decisions based on PB and disregard SB
7
Q
Education, health and transport
A
All provide positive externalities so are under provided by market mechanism
Government can intervene to increase production
Where negative externalities exist gov intervention can overcome overproduction
