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5 Cards in this Set
- Front
- Back
Externality
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The uncompensated impact of one person's actions on the well-being of a bystander
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Internalizing the externality
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Altering incentives so that people take account of the external effects of their actions
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Corrective tax
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A tax designed to induce private decision makers to take account of the social costs that arise from a negative externality
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Coase Theorem
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The proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own
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Transaction costs
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The costs that parties incur in the process of agreeing to and following through on a bargain
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