Economics 1021A/B Chapter Notes - Chapter 16: Pigovian Tax, Coase Theorem, Marginal Cost

• School: Western University
• Department: Economics
• Course: Economics 1021A/B
• Professor: Emilie Rivers

Document Summary

Externality: cost of or benefit from action that falls on someone other than the person or firm choosing the action. Positive consumption externalities (1) negative production externalities: costs of them are borne by everyone, and even by future generations, ex. Burning coal, logging, clearing forests: noise is production externality (2) positive production externalities, companies help eachother out unintentionally (3) negative consumption externalities, source of irritation, ex. Smoking in rooms ban on smoking in rooms, noisy parties ban on noisy parties (4) positive consumption externalities: positive things done for everyone, ex. Private cost of production: cost that is borne by the producer of a good or service. Marginal cost: cost of producing an additional unit of a good or service. Marginal private cost: cost of producing an additional unit of a good or service that is borne by its producers. External cost: cost of producing a good or service that is not borne by the producer but borne by other people.