Key terms - Economics of the environment

Question 1

Abatement technology

Answer 1

A production technology that reduces/prevents pollution.

Question 2

Coase theorem

Answer 2

The proposition that if property rights exist and the transactions costs of enforcing them are low, then private transactions are efficient and it doesn’t matter who has the property rights.

Question 3

Individual transferrable quota (ITQ)

Answer 3

A production limit assigned to an individual who is then free to transfer (sell) the quota to someone else.

Question 4

Marginal external cost

Answer 4

The cost of producing an additional unit of a good or service borne by people other than the producer.

Question 5

Marginal private cost

Answer 5

The cost of producing an additional unit of a good or service that is borne by its producer.

Question 6

Marginal social cost

Answer 6

The sum of marginal private cost and marginal external cost.

Question 7

Negative externality

Answer 7

Arises when the social cost of production exceeds private cost.

Question 8

Pigovian taxes

Answer 8

Taxes used by governments as an incentive for producers to cut back on pollution.

Question 9

Property rights

Answer 9

Legally established rights to the ownership, use, and disposal of factors of production and goods/services.

Question 10

Tragedy of the commons

Answer 10

The overuse of a common resource that arises when its users have no incentive to conserve it and use it sustainably.

Question 11

Transactions costs

Answer 11

The opportunity costs of conducting a transaction.