Explain the Differences Between External Costs,private Costs,and Social Costs and How

question 14

Essay

Explain the differences between external costs,private costs,and social costs and how the presence of external costs leads to market failure.

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Definitions:

Tariff

A tax imposed by a government on goods and services imported from other countries to raise state revenue or to protect domestic industries.

Total Surplus

The total net gain to consumers and producers from trading in a market, represented by the sum of consumer and producer surplus.

Employment

The condition in which an individual who is capable of working is engaged in a paid job.

Small Country Assumption

An economic model assumption that a country's market size is small enough that its actions do not affect world prices or incomes.