Micro 8.5 0.0 / 5 ? EconomicsMarginal Analysis of ExternalitiesA2/A-levelAQA Created by: neve.whinnCreated on: 18-03-20 11:22 What is the margin? Analysis based upon the last or additional unit of output of a good or service produced or consumed. 1 of 16 How is marginal social cost calculated? Marginal private cost + marginal external cost. 2 of 16 How is marginal social benefit calculated? Marginal private benefit + marginal external benefit. 3 of 16 When is social welfare optimised? Marginal social benefit = marginal social cost. 4 of 16 When do positive externalities in production occur? When the actions of firms have wider benefits to society. 5 of 16 What would the firm take into account in a free market situation? Its private costs and benefits, and not those of wider society. 6 of 16 What are the marginal costs and marginal benefits associated with positive externalities in production? Marginal private costs are greater than marginal social costs, meaning there is a negative marginal external cost. 7 of 16 Where does the social optimum quantity occur with positive externalities in production? Marginal social benefits = marginal social costs. 8 of 16 What is the level of production with positive externalities in production? There is under production, leading to an overall welfare loss. 9 of 16 When do positive externalities in consumption occur? When the actions of individual consumers have wider benefits to society, such as in the case of maintaining a healthy lifestyle. 10 of 16 What would the consumer take into account in a free market situation? Their private costs and benefits, and not those of wider society. 11 of 16 What are the marginal costs and marginal benefits associated with positive externalities in consumption? Marginal social benefits are greater than marginal private benefits, meaning there is a marginal external benefit. 12 of 16 Where does the social optimum quantity occur with positive externalities in consumption? Marginal social benefits = marginal social costs. 13 of 16 What is the level of consumption with positive externalities in consumption? There is under consumption of merit goods, leading to an overall welfare loss. 14 of 16 When do negative externalities in production occur? When the actions of firms have wider costs to society. 15 of 16 What would the firm take into account in a free market situation? Its private costs and benefits, and not those of wider society. 16 of 16
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