Externality Flashcards
What is an externality
the spill over affect to a third party as a result of a decision made by a consumer
What are some examples of positive consumption externalities
Healthcare
education
What are some examples of positive production externalities
Training
What are some examples of negative consumption externalities
Smoking
Alcohol
what are some examples of negative production externalities
Air pollution
Deforestation
What is a positive consumption externality
The benefit to 3rd parties as a result of actions of consumers.
what is a negative consumption externality
The cost to 3rd parties as a result of 3rd parties as result of actions of consumers.,
What is a positive production externality
The benefit to 3rd parties as a result of actions of consumers.
what is a negative consumption externality
The cost to 3rd parties as a result of 3rd parties as result of actions of consumers
What way should the wellfare loss always point
towards the social optimum/point where the social graph overlap
What is the MSB
marginal social benefit
What is MPB
marginal private benefit
What is MPC
marginal private cost
What is MSC
marginal social cost
in a positive consumption externality…
MSB>MPB
