Positive Externalities and the Coase Theorem

These flashcards cover key terms and concepts related to positive externalities, the Coase theorem, and their implications in economic scenarios.

Positive externality

A situation where benefits spill over to bystanders, who benefit from the consumption of a good without being involved.

Landscaping

The act of beautifying a property, which provides private benefits to the owner and external benefits to neighbors.

Vaccination

A medical intervention that provides private health benefits and external health benefits to others, such as reducing the spread of illness.

Social benefit

The total benefit to society from an action, including both private and external benefits.

Coase Theorem

A principle stating that if property rights are well-defined and transaction costs are low, externalities can be internalized.

Transaction costs

The costs associated with negotiating and executing an exchange, which can hinder the resolution of externalities.

Efficient outcome

An economic situation where the party that values a resource the most gets access to it, maximizing overall benefit.

High transaction costs

Situations where negotiation and agreement are difficult due to the complexity and number of parties involved in an exchange.

Pollution

The introduction of harmful substances into the environment, which can be economically valued differently by various stakeholders.

Court system

A legal framework through which disputes can be resolved, often used by corporations to pursue interests in cases of externalities.