ECO105Y1 Chapter Notes - Chapter 11: Passive Smoking, Social Cost, Externality
Document Summary
Eco105 economics: chapter 11: acid rain on others" parades. Externaliies, carbon taxes, free riders, and public goods. Negaive externaliies (external costs): costs to society from your private choice that afect others but that you do not pay (social costs > private costs) Posiive externaliies (external beneits): beneits to society from your private choice that afect others, but that others do not pay you for (social beneits > private beneits) When externaliies exist, prices don"t relect all social costs and beneits: markets fail to produce eicient outcomes. Instead markets produce: too many products and services with negaive externaliies (second-hand smoke, polluion, traic jams, too few products and services with posiive externaliies (vaccinaions, educaion) The market quanity and price are determined at the intersecion of the marginal private beneit and marginal private cost curves. Markets overproduce products and services with negaive externaliies;; the price is too low because it does not incorporate external costs.
