Negative Externalities Flashcards
0
Q
Private optimum level
A
PMC= PMB
1
Q
Negative externality
A
Negative spill over affect
Third party cost
Market failure
2
Q
Social optimum level
A
SMC=PMB
3
Q
Tax for externalities
A
To reduce its production and consumption
4
Q
What happens if externalities aren’t included?
A
Over production and consumption
5
Q
Disadvantages
A
Inflationary-cost push inflation
Can’t calculate the external cost accurately
Setting the right tax rate is difficult
Effectiveness depends on PED
Regressive-depends if you are poor or rich
Avoidance
6
Q
Policies
A
Environmental taxation Vehicle excise duty The landfill tax The climate change levy Duty on demerit goods-cigarettes & alcohol London congestion change
