Externalities, merit and demerit goods and public, quasi public and private goods

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  • Created by: Jade
  • Created on: 01-12-12 15:54
What are externalities ?
Externalities occur when a third party is affected by the economic decisions of others.
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What are private costs?
Private costs are costs which are paid for by an individual economic unit e.g. consumer/firm (first party)
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What are social costs?
Social costs are all the related costs associated with an action, both private and external costs.
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What are negative externalities?
Negative externalities occur when the social costs are greater than the private costs.
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Negative externalities create _________.
External costs
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If the market does NOT take negative externalities into account the result is that the socially efficient output is ______ than the current output.
Less
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Negative externalities cause the social cost curve to lie ____ the private cost curve
Above
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What is a positive externality?
Positive externality occurs when the social benefit is greater than the private benefit
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As a result of positive externalities, the socially efficient output is _____ than the current output.
Greater
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Negative externalities result in?
Overproduction
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Positive externalities result in?
Underproduction
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What is a merit good?
Merit goods have more private benefits than consumers actually realise
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What is a demerit good?
Demerit goods, their consumption is more harmful than consumers realise
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Merit goods tend to have ________ externalities associated with their consumption
Positive
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Merit goods are?
Under produced and under consumed
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Education and health are examples are?
Merit goods
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Merit goods and demerit goods are both examples of ?
Both
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Demerit goods, have ______ externalities arising out of their use
Negative
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Value judgements often have to made. Usually by government - assumption is made that these organisations know better than individuals what is good or bad for them. Are all?
Problems when considering whether certain goods are merit or demerit goods
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What is a public good?
Goods that are collectively consumed and have the characteristics of non-excludability and non-rivalry.
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Public goods - it is difficult, if not impossible, to _____ for them directly.
Charge
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What is meant by non-excludability?
Individuals cannot be excluded from their consumption. They are provided for all, irrespective of whether they have paid for the product indirectly through taxation.
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What is meant by non-rivalry?
Consumption by any one person does not affect consumption of any others
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What is meant by a free rider?
Someone who directly benefits from the consumption of a public good but who does not contribute towards its provision
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Both excludable and rival
Private good
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Goods having some but not all of the characteristics of a public good
Quasi public good
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Up to a point, extra consumers using a park, beach or road do not reduce the amount of the product available to other consumers. Eventually additional consumers reduce the benefits to other users. This is?
Semi non-rival
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Fencing a park or beach and charging an entrance fee. This is?
Semi non-excludable
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Other cards in this set

Card 2

Front

What are private costs?

Back

Private costs are costs which are paid for by an individual economic unit e.g. consumer/firm (first party)

Card 3

Front

What are social costs?

Back

Preview of the front of card 3

Card 4

Front

What are negative externalities?

Back

Preview of the front of card 4

Card 5

Front

Negative externalities create _________.

Back

Preview of the front of card 5
View more cards

Comments

izzy

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very good quiz!

davidsalter

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This 10 question quiz can be used to provide a brief respite from intensive reading and highlight areas for further study.

Alvarodasilva17

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(y) 

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slap my botty

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