b) Externalities
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10 Terms
state what causes market failure in terms of positive externalities of consumption
when goods and services that produce positive externalities of consumption are under-consumed
state what causes market failure in terms of negative externalities of consumption
when goods and services that produce negative externalities of consumption are over-consumed
state what causes market failure in terms of positive externalities of production
when goods and services that produce positive externalities of production are under-produced
state what causes market failure in terms of negative externalities of production
when goods and services that produce negative externalities of production are over-produced
define marginal social cost
the cost to society produced from the production or consumption of one unit of a good or service
define marginal social benefit
the benefit to society produced from the production or consumption of one unit of a good or service
define marginal private cost
the cost paid by a firm to produce or the cost paid by a consumer to consume one unit of a good or service
define marginal private benefit
the profit earned by firms from producing or the utility earned by consumers from consuming one unit of a good or service
define welfare loss
the decrease in the productive efficiency of the economy due to a misallocation of resources
define welfare gain
the increase in the productive efficiency of the economy due to an optimum allocation of resources