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.
private cost external cost social cost externalities social surplus efficient equilibrium efficient quantity Pigouvian tax external benefit Pigouvian subsidy internalizing an externality transaction costs Coase theorem | All the costs necessary to reach an agreement. Adjusting incentives so that decision makers take into account all the benefits and costs of their actions, private and social. A tax on a good with external costs. Consumer surplus plus producer surplus plus everyone else’s surplus. A cost borne by people other than the consumers or the producers trading in the market. The private cost plus the external cost. A cost paid by the consumer or the producer. A benefit received by people other than the consumers or producers trading in the market. External costs or external benefits; costs or benefits that fall on bystanders. The quantity that maximizes social surplus. The principle that if transactions costs are low and property rights are clearly defined, private bargains will ensure that the market equilibrium is efficient even when there are externalities. The price and quantity that maximizes social surplus. A subsidy on a good with external benefits. |