Externalities

Question 1

Externalities

Answer 1

a benifit that is incurrec by a third party not directly involved in the transaction

Question 2

Positive Externalities

Answer 2

a benifit that is incurred by a third party not directly involved in the transaction
- example: Vaccines

Question 3

Negative Externalities

Answer 3

a cost that is incurred by a third party not directly involved in the transaction
- example: pollution

Question 4

Command and Control

Answer 4

government regulation sets, for example emission levels that buinesses need to target

Question 5

Market Based Solution:

Answer 5

such as carbon trading market (whoch can get to the regulated level of a command and control market but allows or more efficient firms to bear burden of clean production)

Question 6

Pigouvian Tax or Subsidy

Answer 6

govenrment imposes a tax or subsidy taht is the size of the externality

Question 7

Private Solutions

Answer 7

assigning clear property rights

Question 8

Coase Theorm

Answer 8

when transcations costs (cots of interacting, such as legal fee,s, contracts, time ect.) are very low bargining will lead to an efficent outcome regardless of the initial allocation of property rights.