ECON 1201 Chapter Notes - Chapter 5: Quasi, Public Good, Excludability
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ECON 1201 Full Course Notes
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Document Summary
A competitive market usually does a good job of producing the economically efficient quantity of a good or service, but not when there are externalities in the market. Externality: a benefit or cost that affects someone who is not directly involved in the production or consumption of a good or service. Negative externality : produces more than efficient quantity of good. Positive externality: produces less than efficient quantity of good. In these situations, government intervention can increase efficiency. Externalities cause differences between private costs, social costs, private benefits and social benefits. private cost and any external cost. Private cost: t he cost borne by the producer of a good or service. Social cost: the total cost of producing a good or service, including both the. Private benefit: the benefit received by the consumer of a good or service. Social benefit: the total benefit from consuming a good or service, including both.
