Economics SL

Economics SL - Economics SL Mr. Wong Block 1 Jacky Chong...

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Economics SL – Mr. Wong – Block 1 – Jacky Chong – 1/3/2010 P. 47, Q. 1 Using demand and supply analysis, explain how resources are allocated through changes in price in a market economy. P. 146, Q. 1 a, b a. Explain the concept of negative externalities of production. Negative externalities, also called external costs, occur when the production of a good or a service creates external costs that are damaging (threatening the benefits of) third parties. The damage is mainly related to environment problems, not entirely though. For example, a furniture factory is creating a cost to the community that is greater that the costs of production paid by the factory, because they need to cut down forests to get woods. The factory has its private cost, but it is also creating external costs. Therefore, the marginal social cost of the production is greater than the marginal private cost. The marginal social costs is the sum of marginal private cost and the external costs. The height of marginal social cost from the marginal private cost is the negative
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This note was uploaded on 12/31/2011 for the course ECON 111 taught by Professor Jerryfreek during the Spring '11 term at Ave Maria.

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Economics SL - Economics SL Mr. Wong Block 1 Jacky Chong...

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