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Additional External Cost
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additional costs incurred by third parties outside the production process when a unit of output is produced
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Biodiversity
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the full spectrum of animal and plant genetic material
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Command-And-Control Regulation
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laws that specify allowable quantities of pollution and that also may detail which pollution-control technologies one must use
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Externality
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a market exchange that affects a third party who is outside or "external" to the exchange; sometimes called a "spillover"
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International Externalities
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externalities that cross national borders and that a single nation acting alone cannot resolve
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Market Failure
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When the market on its own does not allocate resources efficiently in a way that balances social costs and benefits; externalities are one example of a market failure
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Marketable Permit Program
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a permit that allows a firm to emit a certain amount of pollution; firms with more permits than pollution can sell the remaining permits to other firms
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Negative Externality
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a situation where a third party, outside the transaction, suffers from a market transaction by others
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Pollution Charge
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a tax imposed on the quantity of pollution that a firm emits; also called a pollution tax
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Positive Externality
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a situation where a third party, outside the transaction, benefits from a market transaction by others
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Property Rights
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the legal rights of ownership on which others are not allowed to infringe without paying compensation
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Social Costs
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costs that include both the private costs incurred by firms and also additional costs incurred by third parties outside the production process, like costs of pollution
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Spillover
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Other people not in the market who are affected by an externality
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