Key Terms

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.

Question

Marginal social cost of pollution
Marginal social benefit of pollution
Socially optimal quantity of pollution
External cost
External benefit
Negative externalities
Positive externalities
Coase theorem
Transaction costs
Internalize the externality
Environmental standards
Emissions Tax
Pigouvian tax
Tradable emissions permit
Pigouvian subsidy
Technology spillover
Excludable
Rival in consumption
Private good
Nonexcludable
Nonrival in consumption
Freerider problem
Public Good
CostBenefit Analysis
the quantity of pollution that society would choose if all the costs and benefits of pollution were fully accounted for
the expenses of negotiating and executing a deal
a good that is both excludable and rival in consumption.
referring to a good, describes the case in which the supplier can prevent those who do not pay from consuming the good
rules established by a government to protect the environment by specifying actions by producers and consumers
the additional gain to society as a whole from an additional unit of pollution
an external benefit that results when knowledge spreads among individuals and firms
the estimation and comparison of the social costs and social benefits of providing a public good
external costs.
a good that is both nonexcludable and nonrival in consumption.
referring to a good, describes the case in which the same unit can be consumed by more than one person at the same time
when individuals take into account external costs and external benefits.
the proposition that even in the presence of externalities an economy can always reach an efficient solution as long as transaction costs are sufficiently low.
external benefits.
referring to a good, describes the case in which one unit cannot be consumed by more than one person at the same time
a payment designed to encourage activities that yield external benefits
taxes designed to reduce external costs
an uncompensated cost that an individual or firm imposes on others; also known as negative externalities.
the additional cost imposed on society as a whole by an additional unit of pollution
licenses to emit limited quantities of pollutants that can be bought and sold by polluters
referring to a good, describes the case in which the supplier cannot prevent those who do not pay from consuming the good
a benefit that an individual or firm confers on others without receiving compensation
a tax that depends on the amount of pollution a firm produces
the problem that results when individuals have no incentive to pay for their own consumption of a good, they will take a “free ride” on anyone who does pay; a problem with goods that are nonexcludable.

Marginal social cost of pollution, p. 276

Marginal social benefit of pollution, p. 276

Socially optimal quantity of pollution, p. 276

External cost, p. 278

External benefit, p. 278

Externalities, p. 278

Negative externalities, p. 278

Positive externalities, p. 278

Coase theorem, p. 280

Transaction costs, p. 280

Internalize the externality, p. 280

Environmental standards, p. 282

Emissions tax, p. 282

Pigouvian tax, p. 284

Tradable emissions permits, p. 285

Pigouvian subsidy, p. 289

Technology spillover, p. 289

Excludable, p. 291

Rival in consumption, p. 291

Private good, p. 291

Nonexcludable, p. 291

Nonrival in consumption, p. 292

Free-rider problem, p. 292

Public good, p. 293

Cost-benefit analysis, p. 297

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