Introduction to Positive Externalities and Social Cost

These flashcards cover key concepts related to positive externalities, social costs, and production as discussed in the lecture.

What defines a positive externality of production?

A positive externality occurs when production generates benefits for society or the environment.

Can you give an example of a positive externality?

Research and development, beekeeping, and blockchain technology are examples of positive externalities.

What happens to the social cost curve when production costs decrease?

The supply curve shifts to the right, indicating an increase in social cost.

What results in market failure despite positive benefits?

Market failure occurs when the production is less than what would be optimal for society.

How is underproduction related to positive externalities?

Underproduction leads to positive externalities, as it results in societal benefits not being fully realized.

What does a welfare loss due to lower production indicate?

It indicates that there is potential gain available in the market that is not being maximized.

What is one way the government can encourage firms to produce more?

The government can subsidize firms to increase production and shift the supply curve.

How does the government solve the welfare loss issue?

The government may provide incremental subsidies to gradually address and potentially eradicate welfare loss.

Why is it important to achieve a higher band in internal assessments?

Being in a higher band can significantly affect overall grades, especially for topics related to market production and analysis.

What was the focus of the project mentioned in the conclusion?

The project focused on improving connectivity between Hong Kong and Macau through a large bridge construction.