ECON 1000 Chapter Notes - Chapter 16: Pigovian Tax, Environment And Climate Change Canada, Ronald Coase

• School: York University
• Department: Economics
• Course: ECON 1000
• Professor: Steven Edwards

Document Summary

An externality is a cost of or a benefit from an action that falls on someone other than the person or firm choosing the action. We call an externality that imposes a cost a negative externality and an externality that provides a benefit a positive externality. We identify externalities as four types: negative production externalities: burning coal to generate electricity emits carbon dioxide that is warming the planet. Logging and the clearing of forests is destroying the habitat of wildlife and also adding carbon dioxide to the atmosphere. These activities are negative production externalities, the costs of which are borne by everyone, and even by future generations. Noise is another negative production externality: positive production externalities: to produce orange blossom honey, a honey producer locates beehives next to an orange orchard. The honeybees collect pollen and nectar from the orange blossoms to make the honey.