Gross Domestic Product (GDP)
The gross domestic product is one of the primary indicators used to gauge the
health of a country’s economy. It represents the total dollar value of all goods
and services produced over a specific time period.
Gross National Product (GNP)
The gross national product is the total value of all final goods and services
produced within a nation in a particular year, plus the income earned by its
citizens. GNP, like GDP, is a measure of the economic condition of a country,
under the assumption that a higher GNP leads to a higher quality of living.
Internal Costs
Internal costs are the costs that a business bases its prices on (e.g., materials,
marketing, energy, labor, and equipment).
Marginal Costs
The “marginal cost” is the cost of producing one more unit of something. Just as
it is possible to have an environment that is “too dirty,” it is also possible to have
an environment that is “too clean” (e.g., it is not efficient to reduce pollution to
zero as the cost of this reduction would probably exceed the benefits).
Waterways and the atmosphere have a natural capacity to assimilate at least
some pollution with no associated ill-effects on the environment. To not benefit
from this natural assimilative capacity would be wasteful.
If the marginal cost of pollution abatement exceeds the marginal benefit from
the reduction, then the benefit of reducing pollution is not worth the expense.
Consequently, further attempts to clean up the environment would result in a
reduction in society’s welfare.
If the marginal benefit of reducing pollution were greater than the marginal
cost of reducing pollution, then society would benefit from a reduction in
pollution. The benefit would be equal to the amount by which the marginal
benefit of the cleanup exceeded the marginal cost of the cleanup.
If the marginal cost of pollution abatement is equal to the marginal benefit
from pollution abatement, then a point is reached where society’s welfare has
been maximized with respect to environmental quality.
Natural Capital
Natural capital is the environmental stock or resources of Earth that provide
goods, flows, and ecological services required to support life. Examples of