Coase theorem  when bargaining is costless and property rights can be assigned without difficulty, the amount of an externality-generating activity will not depend on who is assigned the property rights
emission standard  a maximum allowable level of pollution from a specific source
emissions offset policy  an environmental policy wherein pollution permits are issued and a market in the permits then develops; an increase in pollutants by one source is acceptable if met by a decrease by another source
externalities  the costs or benefits of a transaction that are borne by someone not directly involved in the transaction
free rider  a consumer or producer who enjoys the benefits of a good or service without paying for them
marginal benefit  additional benefit
marginal social cost  the additional social cost that results from a one-unit increase in production
market failure  the failure of the market system to achieve economic and technical efficiency
nonrenewable(exhaustible)natural resources  resources that cannot be replaced or renewed
principle of mutual exclusivity  the rule that the owner of private property is entitled to enjoy the consumption of the property privately
private costs  costs borne by the individual in the transaction that created the costs
private property right  the limitation of ownership to an individual
public goods  goods whose consumption cannot be limited only to the person who purchased the good
renewable(nonexhaustible)natural resources  resources that can be replaced or renewed
social costs  the private and external costs of a transaction