Economics 1021A/B Lecture 23: Externalities

• School: Western University
• Department: Economics
• Course: Economics 1021A/B
• Professor: Nicholas Kahnert

Document Summary

Economics1021 lecture 023 chapter 16 externalities. Externality: cost or benefit from an action that falls on someone other than the person of firm choosing the action. Negative production externalities, positive production externalities, negative consumption externalities, positive consumption externalities: negative production externalities: Burning of coal for electricity effects global warming. Noise: airplanes flying over houses, trains passing through neighbourhoods: positive production externalities: Your roommate won"t get sick either having a nice garden, everyone who looks at it get pleasure. Private cost: cost that is borne by the producer of a good or service. Marginal private cost (mc): the cost of producing an additional unit of a good or service that is born by its producer. External cost: cost that is not borne by the producer of a good or service (the cost falls on others) Marginal external cost: the mc of producing an additional unit of a good or service that falls on people other than the producer.