private cost is the disadvantages to an individual or to a firm resulting from resulting from an economic activity
private benbfit is the advantages to an individual or to a firm resulting from resulting from an economic activity
externality:stuff that affects other people(对其他人的影响)
external cost(a negtive externality负向外部性)is negative impact on third parties resulting from an economic activity
external benefit(a positive externality正向外部性)is positive impact on third parties resulting from an economic activity
examples of a factory
private benefit:the revenue earned by the factory
private cost:the cost of capital, labour, rent and raw material
external benefit:jobs are created reducing unemployment
external cost:the noise, air and environment pollution
social cost is the cost of economic actovity to society as a whole
social benefit is the benefit of economic actovity to society as a whole
social cost = private cost + external cost
social benefit = private benefit + external benefit
If total social benefit>total social cost(economic use of resources)
economic welfare(福利)can be improved by encouraging more production and consumpation
If total social benefit<total social cost(uneconomic use of resources)
economic welfare can be improved by reducing production and consumpation
government policies to deal with externalities
taxation:Pollution may be reduced if a tax is imposed(征收)on firms producing harmful waste. This will raise costs, increasing prices and cut demand for their product
subsidies:Subsidies may be given to those that generate(产生)postive externalities. For example, grants may be to people who install solar panels generate clean electricity
fines(罚款):Financial penalties may be given to those who damage the envirnment. For example, there may be fines for firms that pollute atomosphere
government regulation(法律法规):The EU's Emissions Trading Directive limits the amount of carbon dioxide that firms can release into the atomsphere
other measures:There are congestion(堵车)charges and international agreements to reduse global pollution. Pollution permits gives firms legal right to pollute a certain amount. If firms produce less pollution, they can sell pollution permits to other firms.
