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Tragedy of the Commons
A parable that illustrates why common resources get used more than is desirable from the standpoint of society as a whole
A study that compares the costs and benefits to society of providing a public good
Rivalry in Consumption
The property of a good whereby one person's use diminishes other people's use
A tax designed to induce private decision makers to take account of the social costs that arise from a negative externality
The costs that parties incur in the process of agreeing to and following through on a bargain
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
Internalizing the Externality
Altering incentives so that people take account of the external effects of their actions
Price paid by buyers rises
Consumer surplus equals the area below demand curve and above the buyers price
Price recieved by sellers falls
Producer surplus eqauls area above supply curve and below sellers price
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