lesson 12- externalities Flashcards
what is a positive externality
a benefit to a third party as an indirect effect of another party
what is a negative externality
imposition of a cost on a party as an indirect effect of the actions of another party
what is marginal private cost/MPC
if you consume or produce one more unit, what is the cost to you
what is marginal private benefit/MPB
if you consume or produce one more unit, what is the benefit to you
what is a marginal external cost
if you consume or produce one more unit, what is the cost to everyone else
what is a marginal external benefit
if you consume or produce one more unit, what is the benefit to everyone else
what is marginal social cost
marginal private cost + marginal external cost
what is marginal social benefit
marginal private benefit+ marginal external benefit
what is a negative externality in terms of MSC and MSB
MSC>MSB
what is a positive externality in terms of MSC and MSB
MSC<MSB
what is a negative externality in production
-draw graph
negative impact on a third party caused by production
https://www.google.com/imgres?q=negative%20externality%20in%20production&imgurl=https%3A%2F%2Fi0.wp.com%2Fedexceleconomicsrevision.com%2Fwp-content%2Fuploads%2F2018%2F01%2Fnegative-externalities-over-production.png%3Fresize%3D560%252C412%26ssl%3D1&imgrefurl=https%3A%2F%2Fedexceleconomicsrevision.com%2Fhome%2Ftheme-1-introduction-to-markets-and-market-faliure%2Fexternalities%2F&docid=v06XSc_gdyKRxM&tbnid=ADCT1aC6cbZD6M&vet=12ahUKEwijv_P4qKWMAxViV0EAHbUvPUsQM3oECDEQAA..i&w=560&h=412&hcb=2&ved=2ahUKEwijv_P4qKWMAxViV0EAHbUvPUsQM3oECDEQAA
what is a positive externality in production
-draw graph
a benefit to a third party caused by production
https://www.google.com/imgres?q=positive%20externality%20in%20production&imgurl=https%3A%2F%2Fwww.economicshelp.org%2Fwp-content%2Fuploads%2F2012%2F11%2Fpositive-externality-in-production.jpg&imgrefurl=https%3A%2F%2Fwww.economicshelp.org%2Fmicro-economic-essays%2Fmarketfailure%2Fpositive-externality%2F&docid=hCsYec7-Ug0BoM&tbnid=K98cNwlikHCv-M&vet=12ahUKEwjHl4-oqaWMAxUHT0EAHdl_NscQM3oECBUQAA..i&w=713&h=595&hcb=2&ved=2ahUKEwjHl4-oqaWMAxUHT0EAHdl_NscQM3oECBUQAA
what is the social optimum output
MSC=MSB
what is a positive externality in consumption
-draw graph
consuming a product benefits others
MSB>MPB
https://www.google.com/imgres?q=positive%20externality%20in%20consumption&imgurl=https%3A%2F%2Fwww.economicshelp.org%2Fwp-content%2Fuploads%2F2012%2F11%2Fpositive-externality-consumption-id-600x491.png&imgrefurl=https%3A%2F%2Fwww.economicshelp.org%2Fmicro-economic-essays%2Fmarketfailure%2Fpositive-externality%2F&docid=hCsYec7-Ug0BoM&tbnid=gCvsvvTksecolM&vet=12ahUKEwjSy6mLr6WMAxU_R0EAHTZkNFQQM3oECBsQAA..i&w=600&h=491&hcb=2&ved=2ahUKEwjSy6mLr6WMAxU_R0EAHTZkNFQQM3oECBsQAA
what is a negative externality in consumption
-draw graph
consuming a product negatively affects others
MPB>MSB
https://www.google.com/imgres?q=negative%20externality%20in%20consumption&imgurl=https%3A%2F%2Fwww.ezyeducation.co.uk%2Fimages%2FLexicon_Images%2Fdemerit_good.jpg&imgrefurl=https%3A%2F%2Fwww.ezyeducation.co.uk%2Fezyeconomicsdetails%2Fezylexicon-economic-glossary%2F784-negative-consumption-externalities.html&docid=ZLhJuium1qfRAM&tbnid=mNP0Jcsl5aRDdM&vet=12ahUKEwiW6Oeor6WMAxWEQEEAHc2DH0kQM3oFCIYBEAA..i&w=908&h=617&hcb=2&ved=2ahUKEwiW6Oeor6WMAxWEQEEAHc2DH0kQM3oFCIYBEAA