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Total external costs - PowerPoint PPT Presentation

Chapter 3

Chapter 3. Externalities and Public Policy. Externalities. Externalities are costs or benefits of market transactions not reflected in prices. Negative externalities are costs to third parties. Positive externalities are benefits to third parties . Externalities and Efficiency.

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Topic 2: Production Externalities

Topic 2: Production Externalities. Externalities ? the market outcome will be in efficient, in the sense that: total net benefits (NB) are not maximized; or (equivalently) it is possible to make at least one individual better off without making any other individual better off.

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Total external costs - PowerPoint PPT Presentation

Chapter 3

Topic 2: Production Externalities