Externality

Question 1

externality

Answer 1

the direct effect of the actions of a person or firm on another persons wellbeing or a firms production capability rather than an indirect effect through changes in prices

Question 2

negative

Answer 2

that harms someone

Question 3

positive

Answer 3

that benefits others

Question 4

private cost

Answer 4

the cost of production not including externalities

Question 5

social cost

Answer 5

private cost + cost of harms from externality

Question 6

private benefit

Answer 6

the benefit of production not including externality

Question 7

social benefit

Answer 7

private benefit + benefit of externalities

Question 8

draw the graph

Answer 8

negative

Question 9

draw the graph

Answer 9

positive

Question 10

net welfare loss (n)

Answer 10

MSC>MSB

Question 11

net welfare loss (p)

Answer 11

MSB>MSC

Question 12

positive externality

Answer 12

benefit enjoyed by a 3rd party (free riders)

Question 13

merit goods

Answer 13

healthcare, education, for example skill and knowledge learnt in university can benefit the wider community / workforce

Question 14

coase theorem

Answer 14

the optimal levels of pollution and output can result from bargaining between polluters and their victims if property rights are clearly defined–gravitating towards the most efficient and mutually beneficial outcome

Question 15

property rights

Answer 15

if there are two firms one causing a negative externality and therefore affecting the production of the other firm - can be granted with a property right, setting a fair level making both companies profits and not damaging the others

Question 16

public goods

Answer 16

a commodity of service whose consumption by one person does not preclude the others from consuming it

produces a POSITIVE EXTERNALITY; excluding anyone from consuming it is inefficient

Question 17

rivalry

Answer 17

only one person can consume the good

Question 18

exclusion

Answer 18

means that others can be prevented from consuming the good

Question 19

FREE ACCESS

Answer 19

the internet, roads, NHS

Question 20

free rider problem

Answer 20

the benefit from consuming without paying - taking advantage of provision e.g. public goods consuming without paying your share in tax

Question 21

value of public goods

Answer 21

surveys and voting results

Question 22

reducing externalities

Answer 22

Kyto agreement - a treaty that sets a quota on the amount of CO2 emissions (greenhouse gasses) based on if global warming exists, and human made CO2 emissions have caused it