T5 Flashcards
(4 cards)
1
Q
Define a negative externality
A
a negative externalities are the imposition of a cost on a third party outside of the transaction due to over production
2
Q
How do you calculate social cost?
A
Social costs = marginal private costs + marginal external cost
3
Q
what is FME?
A
free market equillibrium, state where supply and demand for goods are balanced, resulting in stable prices
4
Q
what is SOP?
A
socially optimal position
