Social Costs and Benefits Flashcards
The difference between a firm’s private costs and its private benefits
Profit
Economic activities that have negative impact on others, and the impact is not taken into account/paid for by those who created it
External cost
Economic activities that have positive impacts on others and when the impact is not taken into account/paid by those who benefit
External benefit
A use of resources is ________________ when social cost exceeds social benefit
Uneconomic
The total economic cost of an activity to a society, including private costs and external costs
Social cost
Total economic benefits of an activity to a society, sum of private benefits and external benefits
Social benefits
_________ can increase private costs of activities that create external costs, causing firms to decrease production
Taxes
______________ can be paid to firms to encourage them to move resources to activities that create more external benefits
Subsidies
_________ and ____________________ can make some economic activities that create external costs, illegal
Laws and regulations
