A negative effect borne onto a third party.
A positive effect borne onto a third party.
Costs which have to be borne by a third party.
Affect economic well-being.
Cause markets to allocate resources inefficiently.
Cause governments to respond to decisions to protect third parties.
Cannot be represented in graph form.
Social cost curve lies to the LEFT of a supply (private cost)curve.
Social value curve lies to the RIGHT of demand (private benefit) curve.
Markets produce LARGER quantity than is socially desirable.
Markets produce SMALLER quantity than is socially desirable
They can bargain over the allocation of resources by methods of payment.
They can bargain over the allocation of resources without cost.
The government is involved.
They ignore all costs to third parties.
Making certain behaviours required.
Making certain behaviours forbidden.
Ignoring certain behaviours.
Tax enacted to correct the effect(s) of a negative externality.
Tax enacted to correct the effect(s) of a positive externality.
Tax enacted to correct the effect(s) of governmental mistakes.
Tax enacted to correct the effect(s) of income poverty.
Internalize the externality of pollution by making it cheap for firms to pollute.
Are cost-effective in terms of methods to keep the environment clean.
Are voluntary transfers of the right to pollute, from one firm to another.
May be worse than Pigovian Tax if the government doesn't know the demand curve.
Internalize the externality of pollution by making it costly for firms to pollute.