Chapter 5 - 8 Vocabulary

Chapter 5 - 8 Vocabulary - Ian Overbaugh 1 Econ Midterm...

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Ian Overbaugh 1 Econ Midterm Exam 2 Chapters 5 - 8 Chapter 5: Externalities, Environmental Policy, and Public Goods Externality : a benefit or cost that affects someone who is not directly involved in the production or consumption of a good or service Private Cost : the cost borne by the producer or a good or service Social Cost : the total cost of producing a good, including both the private cost and any external cost Private Benefit : the benefit received by the consumer of a good or service Social Benefit : the total benefit from consuming a good, including both the private benefit and any external benefit Market Failure : situations in which the market fails to produce the efficient level of output Property Rights : the rights individuals or businesses have to the exclusive use of their property, including the right to buy or sell it Transaction Costs : the costs in time and other resources that parties incur in the process of agreeing to and carrying out an exchange of goods or services. Coase Theorem : the argument of economist Ronald Coase that if transactions costs are low, private bargaining will result in an efficient solution to the problem of externalities. Pigovian Taxes and Subsidies : government taxes and subsidies intended to bring about an efficient level of output in the presence of externalities. Command and Control Approach : government-imposed quantitative limits on the amount of pollution firms are allowed to generate, or government-required installation by firms of specific pollution control devices. Rivalry : the situation that occurs when one person’s consuming a unit of a good means no one else can consume it. Excludability : the situation in which anyone who does not pay for a good cannot consume it. Private Good : a good that is both rival and excludable. Common Resource
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Chapter 5 - 8 Vocabulary - Ian Overbaugh 1 Econ Midterm...

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