AGEC 315 Exam 2 Already Rated A+
External Cost ️a cost paid by people other than the consumer or the producer trading in the market
Private Cost ️a cost paid by the consumer or the producer
Social Cost ️-the total cost of producing a good or service, including both the private cost and ...
External Cost ✔️a cost paid by people other than the consumer or the producer trading in the market
Private Cost ✔️a cost paid by the consumer or the producer
Social Cost ✔️-the total cost of producing a good or service, including both the private cost and any
external cost
-private cost + external cost
Externality ✔️a cost or benefit that unintentionally falls on bystanders (no ill will was meant)
Examples of externalities ✔️second hand smoke, smell of livestock operations and certain fertilizer
applications, sediment loss into reservoirs, well maintained lawn
Economic efficiency ✔️-if a market ignores externalities the market equilibrium does not maximize net
benefits to society
-markets must trade all costs and benefits to maximize those net benefits
-consumers and producers base their decisions on private costs and benefits only
Pigouvian tax ✔️Government intervention that drives a wedge between the price consumers pay and
the price producers receive
Permit trading ✔️-government intervention set the quantity of production (or pollution) and allows
firms to barter permits for amounts they can produce (or pollute)
True ✔️T/F: Coase theorem says that economic efficiency can be reached without government
intervention if the transaction costs are low.
, Leakage ✔️the unintended change outside of payment for environmental services (PES) programs that
reduce environmental benefits
Non-additionality ✔️are when the marginal or additional benefits of a payment for environmental
services (PES) are only realized if adoption would not have occurred without the payment.
Externalities in the current food system ✔️The Hidden Cost of Food is a modern phrase to express what
problem
-tax food intake
-subsidize exercise ✔️likely the most effective ways to reduce obesity in the United States
Agriculture ✔️U.S. economic sector accounts for about 10.5% of greenhouse gas emissions
Dust Bowl ✔️coined as the largest manmade ecological disaster in history
Point ✔️type of pollution that can be traced back to its point of emission
Public good ✔️Agricultural research and development is an example of what type of good
Non-excludable ✔️The market fails to provide ___________ goods efficiently because private costs and
benefits do not equal social costs and benefits
Rival, non-excludable ✔️Open access goods are __________ and ____________
True ✔️T/F: Free riders are those who enjoy the external benefit of a public good without paying any
costs
True ✔️T/F: If one person provides a public good, others are made better off, and yet they cannot be
charged for it
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