When does the private cost of producing a good differ from the social cost? Give an example. When does the private benefit from consuming a good differ from the social benefit? Give an example.

Externalities are key economic concepts representing the unintended positive or negative side effects of an economic activity that affect other parties who did not choose to incur that cost or benefit. Imagine a factory that emits pollutants into the air as part of its manufacturing process. Although the primary concern of the factory is the cost of production, it does not factor in the health effects on the local community from air pollution—an example of a negative externality.

Negative externalities lead to social costs that exceed private costs; conversely, positive externalities result in social benefits that are greater than private benefits. An example of a positive externality might be a homeowner planting a well-maintained garden that beautifies the neighborhood and increases property values, even for those who do not contribute to the garden's upkeep.

The distinction between social and private benefit highlights the difference between the individual gain and the collective advantage provided by goods or services. The private benefit is the direct satisfaction or gain that a consumer derives from a product or service. This is contrasted with social benefit, which includes all the additional advantages that the rest of the society enjoys as a result of an individual's consumption.

Using the example from the exercise, getting a flu vaccination not only protects the individual but also contributes to public health through herd immunity. This helps protect people who are unable to get vaccinated, such as those with certain medical conditions, thus the social benefits extend beyond the individual's private gain.

Environmental economics is a branch of economics that focuses on the economic effects of environmental policies and the impact of economic activities on the environment. It addresses how economic activity contributes to environmental problems and how it can be reorganized to prevent ecological degradation while maintaining economic viability. The core concern of environmental economics is to develop sustainable policies that balance economic growth with the health of our environment.

For example, an economist specializing in this field might study the social cost of plastic production, considering not only the price of materials and labor but also the environmental impact of plastic waste. They could then propose solutions such as taxes on plastic goods to reflect their true social cost.

Public goods are commodities or services that are provided without profit to all members of society, either by the government or a private individual or organization. Public goods are characterized by two main features: they are non-excludable and non-rival. Non-excludability means that it's not possible to prevent anyone from enjoying the good, and non-rivalry indicates that one person's use of the good does not reduce its availability to others.

Classic examples of public goods include fresh air, street lighting, and national defense. These services or commodities benefit all members of the community and are generally funded by taxpayer dollars because they do not generate direct profits. In terms of the exercise, the social benefit derived from these goods is high, as they contribute to the well-being and functioning of society as a whole.