Define the following terms and explain their importance to the study of economics.
a.
Greenhouse gases
b.
Externality
c.
Emissions permits
d.
Known reserves

What will be an ideal response?

a.Greenhouse gasesare buildups of carbon dioxide in the atmosphere from the burning of fossil fuels such as oil, natural gas, and coal. Documented measures of such gases are used in the research on global warming. If the perceived threat proves to be a reality, economic consequences could be devastating.
b.An externality is an event incidental to an economic action. An externality can be beneficial or detrimental. Externalities are universal and result in (socially) nonoptimal outcomes. Specifically, beneficial externalities result in underproduction of goods and services, while detrimental externalities result in overproduction of goods and services. In the case of environmental pollution, much pollution is caused by externalities.
c.Emissions permitsare a tax-based approach to environmental protection. It provides financial incentives that induce polluters to reduce the damage they do to the environment in order to reduce their tax burden. Permits are tradable and allow firms to decide whether it is cheaper to pollute and pay for the permit or to clean up and sell the permit to another. Because it is market-based, it is an efficient approach to reducing pollution.
d.The known reserves of a mineral or resource are the amounts of the mineral that can be recovered profitably at current technology and current prices. An increase in price, or an improvement in recovery technology, will increase reserves. Production reduces reserves.
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Economics

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