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External Effect (Externality)
Consumption Externalities
External effects are not exclusively generated by producers; consumption choices made by individuals can also create significant uncompensated costs or benefits for third parties, leading to the misallocation of resources.
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Social Science
Empirical Science
Science
Economics
Economy
Introduction to Microeconomics Course
CORE Econ
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Internalizing an Externality
Marginal External Cost (MEC) (Definition)
Negative Externality Example: Robot Factory and Nurses
External Effects as a Source of Social Dilemmas
Negative Externality (External Diseconomy)
Positive Externality (External Economy)
Missing Markets as a Cause of Externalities
Inadequate Property Rights as a Cause of Externalities
Consumption Externalities
An apple orchard operates next to a beekeeper. The bees pollinate the apple blossoms, which increases the orchard's fruit yield. The apple blossoms, in turn, provide nectar for the bees, which increases the beekeeper's honey production. Neither party pays the other for these services. Which statement provides the most accurate economic analysis of this situation?
Residential Development and Air Quality
Market Outcome of Uncompensated Costs
Match each scenario to the economic description that best characterizes the primary effect described.
Policy Evaluation for a Noise Externality
A large chemical company has a manufacturing division that releases pollutants into a river. Downstream, another division of the same company operates a fish farm, which suffers reduced yields due to the pollution. This situation is an example of a negative externality.
Arrange the following events in the correct logical sequence to illustrate how a negative production externality leads to an inefficient market outcome.
When an individual chooses to get vaccinated against a contagious disease, they not only protect themselves but also reduce the likelihood of transmission to others in their community. This uncompensated benefit conferred upon the community is an example of a ________.
Evaluating the Root Cause of a Shared Resource Problem
Analyzing Production Costs and Externalities
Marginal Private Cost (MPC) (Definition)
Learn After
Market Failure and Social Dilemma: The Case of Antibiotic Overuse
An individual in an apartment building purchases a new stereo system and plays music at a volume that significantly disturbs their neighbors. From an economic perspective, which of the following statements best analyzes this situation?
Analyzing Community Benefits of Private Spending
Analyzing Social Benefits of Individual Health Choices
Evaluating the Societal Impact of Individual Consumption Choices
Analyze the following consumption activities and match each one to the economic principle it best illustrates.
A person purchasing a new, high-end electric car benefits the environment by reducing their personal carbon emissions. However, this purchase also causes a neighbor to feel intense envy. In economic terms, this envy is considered a negative consumption externality.
Analyzing the External Effects of a Landscaping Decision
When an individual's consumption of a good generates a negative externality, the social cost associated with that consumption is ________ than the private cost borne by the individual. This discrepancy typically leads to a market outcome where the good is ________-consumed compared to the socially optimal level.
A person's choice to smoke a cigarette in a crowded public space creates effects for others not involved in the decision. Arrange the following statements to correctly describe the economic sequence of events that leads to an inefficient market outcome.
Analyzing the Market for Single-Use Plastic Bags