Match each of the terms on the left with its definition on the right. Click on the term first and then click on the matching definition. As you match them correctly they will move to the bottom of the activity.
externalities Coase theorem market failure public goods nonrivalry nonexcludability free rider tragedy of the commons government failure command and control policies marketbased policies Pigouvian tax costbenefit analysis | Environmental policies that set standards and issue regulations, which are then enforced by the legal and regulatory system The consumption of a good or service by one person does not reduce the utility of that good or service to others The ability of an individual to avoid paying for a public good because he or she cannot be excluded from enjoying the good once provided Goods in which one person’s consumption does not diminish the benefit to others from consuming the good (i.e., nonrivalry), and once provided, no one person can be excluded from consuming (i.e., nonexclusion) Once a good or service is provided, it is not possible to exclude others from enjoying that good or service The impact on third parties of some transaction between others in which the third parties are not involved. An external cost (or negative externality) harms the third parties, whereas external benefits (positive externalities) result in gains to them A methodology for decision making that looks at the discounted value of the costs and benefits of a given project Resources that are owned by the community at large (e.g., parks, ocean fish, and the atmosphere) and therefore tend to be overexploited because individuals have little incentive to use them in a sustainable fashion The result when the incentives of politicians and government bureaucrats do not align with the public interest If transaction costs are minimal (near zero), a bargain struck between beneficiaries and victims of externalities will be efficient from a resource allocation perspective. As a result, the socially optimal level of production will be reached When markets fail to provide the socially optimal level of output, and will provide output at too high or low a price A tax that is placed on an activity generating negative externalities in order to achieve a socially efficient outcome Environmental policies that use charges, taxes, subsidies, deposit-refund systems, or tradable emission permits to achieve environmental goals |