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CHAPTER 3- EXTERNALITIES AND PUBLIC POLICY

CHAPTER 3- EXTERNALITIES AND PUBLIC POLICY

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Published by: watts1 on Feb 09, 2010
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09/14/2011

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1
Chapter 3
Externalities and Public Policy
 
2
Externalities
 
Externalitiesare costs or benefits of market transactions not reflected inprices.
Negative externalitiesare costs to thirdparties.
Positive externalitiesare benefits to thirdparties
.
 
3
Externalities and Efficiency
Themarginal external costis thedollar value of the cost to thirdparties from the production or consumption of an additional unitof a good. These occur whenmarket transactions for a goodproducenegative externalities.

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