Econ Chapter 10

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Econ Chapter 10
2014-04-07 15:48:41
Economics Shah Chapter 10

Economics Chapter 10
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  1. Externality
    The uncompensated impact of one person's actions on the well being of a bystander
  2. Internalizing the externality.  Which of the following represents a way that a government can help a private market to internalize an externality?
    • taxing negative externalities and subsidizing positive externalities
  3. The difference between social cost and private cost
    • Cost of externality
  4. Social Cost
    private costs + cost of externality
  5. Example of Negative Externality
    • Air Pollution
    • Noise Pollution
    • Water Pollution

    ie meat factory in residential area can pollute water and make them sick
  6. Example of Positive Externality
    • Infrastructure
    • Education
    • Research and Development
    • Vaccination/Inoculation

    ie beehive in field benefits both farmer and bee
  7. When technology spillover occurs
    • Research yields technological knowledge that can be used by society as a whole
  8. Coase Theorem
    the proposition that if private parties can bargain without costs over the allocation of resources they can solve the problem of externality on their own
  9. Another term of government regulation
    • Command and control policy
  10. A Corrective Tax
    • Places a price on the right to pollute
  11. Tradable permits. In some cases tradable permits may be better than corrective taxes because
    • The government can set a maximum level of pollution permits