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External Effect (Externality)
Marginal Private Cost (MPC) (Definition)
The marginal private cost (MPC) is the direct cost a producer incurs to create one additional unit of a good. This concept focuses exclusively on the internal costs shouldered by the producer, such as labor and materials, and intentionally excludes any external costs, or externalities, that might affect third parties. [1, 4, 6]
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Social Science
Empirical Science
Science
Economics
Economy
Introduction to Microeconomics Course
CORE Econ
Ch.10 Market successes and failures: The societal effects of private decisions - The Economy 2.0 Microeconomics @ 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)
Marginal Social Benefit (MSB) (Definition and Formula)
Learn After
A chemical plant produces one additional barrel of solvent. The costs directly associated with producing this single extra barrel are: 20 for the labor involved. The production process for this barrel also releases pollutants into a nearby river, which requires a separate, publicly-funded agency to spend $15 on water purification. What is the marginal private cost of producing this one additional barrel of solvent?
Analyzing Production Costs at a Paper Mill
A furniture factory decides to produce one additional wooden chair. The factory's manager calculates the cost of the extra wood and the wages for the labor required for that single chair. The manager also notes that the noise from producing this chair will disturb the neighboring residents, a cost not borne by the factory. Which of the following statements correctly identifies the marginal private cost (MPC) for this additional chair?
Calculating a Bakery's Production Cost
To accurately calculate the marginal private cost of producing one more unit of a product, a firm must sum the costs of its own materials and labor, as well as any environmental cleanup costs paid by the local community due to the production.
Analyzing a Manufacturer's Production Costs
A company is calculating the cost of producing one additional unit of its product. Match each cost component below to the correct category: 'Included in Marginal Private Cost' or 'Excluded from Marginal Private Cost'.
When a factory calculates the cost of producing one more widget, the expense for the raw materials and the worker's hourly wage are considered its ______. The cost of the resulting air pollution, which affects the local community, is not included in this specific calculation.
Evaluating the Usefulness of Marginal Private Cost
A small coffee shop roasts its own beans. To roast one additional pound of coffee, the shop incurs the following costs: 1 for the electricity to run the roaster, and 2. Which of the following calculations correctly represents the coffee shop's marginal private cost for this additional pound of coffee?