Ch 9 - Market Failure

Negative Externalities

________: are the ‘ bad effects that are suffered by the third party, for which.

Sustainability Sustainable development

________ is where consumption needs of the present.

Tradable permits

________ is a market- based solution to negative externalities of production.

Generation

________ are met without reducing the ability to meet the needs of future ________.

maximum amount of pollution

Are permits to pollute, issued by government, which sets a(n) ________.

Public goods

________ are goods or services which would be under- provided or not provided at all.

Market failure

________ occurs when resources arent allocated in an optimal manner, meaning.

Merit goods

________ are goods or services considered to be beneficial for people who use them.

Demerit goods

________ are goods or services considered to be harmful to people who consume.

Private cost

cost on you, as a consumer

Private benefit

benefit for you, as a consumer

External cost

cost on other people because of you

External benefit

other peoples benefit because of you

Social cost

private and external cost

Social benefit

private and external benefit

Marginal social cost (MSC)

total cost society pays for the production of another unit of taking further action in the economy

Marginal social benefit (MSB)

individuals social benefit, plus overall benefit to society from one additional unit of production

Externalities

when a production or consumption of a good has an effect on third party occurrence

Negative Externalities

are the ‘bad effects that are suffered by the third party, for which

Market failure

occurs when resources aren’t allocated in an optimal manner, meaning

that the market isn’t allocatively efficient, and community surplus isn’t maximized.

Public goods

are goods or services which would be under-provided or not provided at all

by the free market.