b) Externalities

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10 Terms

1
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  • market failure is caused when goods/services that create positive externalities of consumption…


  • are under-consumed


2
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  • market failure is caused when goods/services that create negative externalities of consumption…


  • are over-consumed


3
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  • market failure is caused when goods/services that create positive externalities of production…


  • are under-produced


4
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  • market failure is caused when goods/services that create negative externalities of production…


  • are over-produced


5
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  • marginal social cost


  • the cost to society produced from the production or consumption of one additional unit of a good or service


6
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  • marginal social benefit


  • the benefit to society produced from the production or consumption of one additional unit of a good or service


7
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  • marginal private cost


  • the cost to a firm to produce one additional unit of a good/service

  • to cost to a consumer to consume one additional unit of a good or service


8
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  • marginal private benefit


  • the profit earned by a firm for producing one additional unit of a good/service

  • the utility earned by a consumer from consuming one additional unit of a good or service


9
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  • welfare loss


  • the decrease in the productive efficiency of the economy due to a misallocation of resources


10
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  • welfare gain


  • the increase in the productive efficiency of the economy due to a socially optimum allocation of resources