positive consumption and negative production externalities Flashcards
1
Q
NE in production
A
cost to 3rd parties as a result of action of producer(airplanes cause pollution)
price is too low
over production
MSC > MPC
2
Q
PE in consumption
A
benefits to 3rd parties as a result of the actions by consumers(healthcare)
MSB > MPC
under consumption
misallocation of resources as people ignore the external benefits