Lesson 17 - Externalities

Question 1

what are the private costs of consuming and producing?

Answer 1

costs created by those consuming and producing

Question 2

what are the private benefits of consuming and producing?

Answer 2

benefits received by those consuming and producing

Question 3

what are the social costs of consuming and producing?

Answer 3

the total cost to society (includes externalities)

Question 4

what are the social benefits of consuming and producing?

Answer 4

the total benefits (includes externalities)

Question 5

what are externalities?

Answer 5

the knock on effects of the consumption of a good/service, that impacts third parties

Question 6

describe merit goods

Answer 6

• under consumed
• positive externalities

Question 7

describe demerit goods

Answer 7

• overconsumed
• negative externalities