A situation where free market forces have resulted in a good or service being under or over provided i.e free market forces do not result in the socially optimal level of output
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Negative Externality
If social cost exceeds private cost, the difference is a negative externality i.e it means the same as external cost
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Positive Externality
If social benefit exceeds private benefit, the difference is a positive externality i.e it means the same as external benefit
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Monopoly
A sole supplier of a good or service
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Private Costs
Costs incurred directly by individual producers and consumers when they engage in an economic activity. These are the costs that are taken into account by free market forces
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Private Benefits
Benefits directly received by individual producers and consumers when they engage in an economic activity. These are the benefits that are taken into account by free market forces
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External Costs
Costs experienced by third parties i.e. producers and consumers who are not directly involved in an economic activity. These costs are ignored by free market forces
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External Benefits
Benefits received by third parties i.e. producers and consumers who are not directly involved in an economic activity. These benefits are ignored by free market forces
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Social Costs
All of the costs of an activity to society i.e. private cots + external costs
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Social Benefits
All of the benefits of an activity to society i.e. private benefits + external benefits
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Other cards in this set
Card 2
Front
If social cost exceeds private cost, the difference is a negative externality i.e it means the same as external cost
Back
Negative Externality
Card 3
Front
If social benefit exceeds private benefit, the difference is a positive externality i.e it means the same as external benefit
Back
Card 4
Front
A sole supplier of a good or service
Back
Card 5
Front
Costs incurred directly by individual producers and consumers when they engage in an economic activity. These are the costs that are taken into account by free market forces
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