Externalities and public goods Flashcards
What is an externality?
occurs when a person’s wellbeing or firm’s production capability is directly affected by the non-price actions of other consumers or firms
What do negative externalities do?
Harm others
Firms and consumers don’t have to pay for negative externalities, so there are:
Excessive amounts
What is the primary result of externalities?
Nonoptimal production
What is the public cost?
Private cost plus the cost of harms from externalities
What is a government limit on the amount of pollution that may be realeased called?
Emissions standard
What is a government limit on the amount of pollution that may be released called?
Emissions standard
A tax on air pollution is called an:
Emissions fee
What is a tax on discharges into air or waterways called?
Effluent charge
What does an emissions fee force a firm to do?
Internalize the externality
what externality relevant level does a monopoly produce at?
Intersection of MR and privte MC
With monopoly, Welfare is always…?
Lower
What is a property right?
An exclusive privilege to use an asset
What does the Coase theorem state?
Optimal levels of pollution and output can result from bargaining between polluters and their victims
What is a common externality with open access common property?
Overuse
