The document discusses externalities, which are costs or impacts of economic transactions that are borne by parties not directly involved in the transactions. It provides examples of negative externalities like pollution and climate change caused by industries like fossil fuel production and industrial farming. While the free market only considers direct supply and demand factors in pricing goods, it does not account for these external costs to society and the environment. The document questions whether governments should impose taxes to make prices truly reflect all costs, including externalities, and who should pay the costs of externalities currently not priced into goods like gasoline.

1. Externalities The Real Costs

2. Worldwide gas prices

3. Worldwide gas taxes

4. US Gas Tax What is your opinion about the US gas tax? (Should it go up or down?)

5. Externalities Definition: An externality is an effect of a purchase or decision by one set of parties on others who did not have a choice and whose interests were not taken into account. Classic example of a negative externality: pollution, generated by some productive enterprise, and affecting others who had no choice and were probably not taken into account.

6. Externalities In other words… Side Effects

7. Externality Video

8. Real Externalities List 2 specific real life examples of externalities:

9. Real Externalities Smoking Pollution Industrial farming Climate change

10. The Free Market The free market is efficient and sets the price of gas based on supply and demand. Is there anything the free market does not consider in the cost? Who has to pay the price of these costs?

11. Hidden Costs There are certain hidden or long term costs of the transaction that the free market does not take into consideration. Should the government impose a tax equal to the true costs of the transaction?

13. Exxon Exxon set an annual profit record by earning $45.2 billion, or nearly $1500 a second in 2008.

14. Gas Price What are some factors that determine the price of gas?

15. Factors Gas price free market only Drilling Refining R & D Marketing Employees Regulations Profit Tax

16. Externalities What factors that effect others are not considered when setting the price of gas?

17. Externalities Gas price with externalities Cost of roads Cost of infrastructure Cost of wars Environment Climate Change Pollution Health costs of pollution Cancer Emphysema Heart disease

18. Who pays? Who should pay those costs? What should the government do about the costs that are not included in the price of gas but that we all bear?

19. Gas prices How much would you charge per gallon of gas to cover the externalities of gasoline?