ECON 002 EXAM

ECON 002 EXAM - This forces the company to internalize the...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
ECON 002 EXAM #2 REVIEW Chapter 32 - Enviornmental Economics Social Costs and Private Costs - social issues occur when social (internal + exernal) costs exceed private (internal) cost EXTRANALITY - a situation in which a private cost or benefit diverges from a social cost or benefit. - costs and benefits are not fully borne or gained by two parties engaged in scarce resource-using activity, creating a third party problem. - negative externality makes it worse off for third parties and vice versa How to correct Externalities -a community and its government always look to reach the social optimum. For negative externalities , a government can: - legislatively force the company to change something - tax the industry - require compensation for the damage that it causes.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: This forces the company to internalize the externality and help reduce the damage it is causing to society/environment Examples: pollution, traffic congestion , -for positive extranalities , the market is undersupplied - members of the community benefit by paying only thorough the tax system thus increasing the supply of the good and to make sure everyone is satisfied Examples: smell of a bakery, vaccine, golf course, museum, city parks-some externalaties are inframarginal.- the government should not intervene because the solution is too costly. Examples: someone using cell phone in class, occasional noise from a nearby park Private Property...
View Full Document

Page1 / 2

ECON 002 EXAM - This forces the company to internalize the...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online