Chapter 16:17 - Externalization Flashcards
Excludable good
Can prevent someone from using it
Inexcludable
Can’t be prevented from using it
Rival good
In competition – can be taken away
Nonrival
No competition - can’t be taken away
Pigouvian tax
Tax on a polluter.
Emissions charges
Government sets a price per unit of pollution.
MSB
MB+MEB
Public provision
Government taxes all consumers of a public good and forces everyone to pay for its provision.
Free-rider
Someone who enjoys the benefit of a good/service without paying for it.
Free-rider problem
Market would provide an inefficiently small quantity of a public good (because nobody is paying for it).
Externality
Cost/ benefit arising from a transaction that falls on someone that is not party to the transaction.
Mixed good
Private good where the production or consumption thereof creates an externality.
Property rights
Legally established titles to the ownership, use, and disposal of factors of production of goods and services are enforceable in the courts.
The Coase thoerem
If property rights exist, only a small number of parties are involved, and transaction costs are low, then private transactions are efficient.
Government action in face of external benefits
Public provision
Subsidies
Vouchers
Patents and copy rights
