Chapter 14 Flashcards
(18 cards)
abatement technology
a production technology that reduces or prevents pollution
coase theorum
the proposition that if property rights exist, if only a small number of parties are involved, and transactions costs are low, then private transactions are efficient, and it doesn’t matter who has the property rights
externality
a cost of or a benefit from an action that falls on someone other than the person or firm choosing the action
marginal external benefit
the benefits from an additional unit of a good or service that people other than the consumer enjoy
marginal external cost
the cost of producing an additional unit of a good or service that falls on people other than the producer
marginal private benefit
the benefit from an additional unit of a good or service that the consumer of that good or service receives
marginal private cost
the cost of producing an additional unit of a good or service that is borne by the producer of that good or service
marginal social benefit
the marginal benefit enjoyed by society–by the consumer of a good or service (marginal private benefit) plus the marginal benefit enjoyed by others (marginal external benefit)
marginal social cost
the marginal cost incurred by the producer and by everyone else on who the cost falls–by society; the sum of marginal private cost and marginal external cost
negative externality
an externality that arises from either production or consumption and that imposes an external cost
Pigovian taxes
taxes that are used as an incentive for producers so cut back on an activity that creates an external cost
positive externality
an externality that arises from either production or consumption and that creates an external benefit
property rights
the social arrangements that govern the ownership, use, and disposal of anything that people value; enforceable in the courts
public production
the production of a good or service by a public authority that receives its revenue from the government
subsidy
a payment made by the government to a producer
transactions costs
the opportunity costs of making trades in a market; the costs that arise from finding someone with whom to do business, of reaching an agreement about the price and other aspects of the exchange, and of ensuring that the terms of the agreement are fulfilled
voucher
a token that the government provides to households, which they can use to buy specified goods and services
allocative efficiency
resources are used where they are most highly valued
