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22 Cards in this Set
- Front
- Back
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__= a good or service that has 2 characteristics; nonrivalry in consumption and nonexcludability
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public good
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__= the situation inwhich increased consumption of a good by one person does not decrease the amt available for consumption by others
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nonrivalry
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__= the sitation in which no one can be excluded from consuming a good
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nonexcludability
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__= a problem arising in the case of public goods bc those who do not contribute to the costs of providing the public good cannot be excluded from the benefits of the good
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free-rider problem
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__= a fee charged for the use of a good normally provided by the gvt
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user fee
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__= an appraisal of a project based on the costs and benefits derived from it
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cost-benefit analysis
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__= an estimation of the willingness to pay for a project on the part of consumers who may benefit
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contingent valuation
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__= situation in which the costs of producing or the benefits of consuming a good spill over onto those who are not producing or consuming the good
-Ex; production of goods that cause pollution |
externality
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__= situation in which costs spill over onto someone who is not involved in producing/consuming the good
-cause a negative effect/cost on well-being of others -Ex; ppl smoking around u and you getting second hand smoke |
negative externality
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__= situation where benefits spill over onto someone who is not involved in producing/consuming the good
-positive effects/benefits -Ex; gettting the flu shot protects you from getting the flu and others from catching it from you |
positive externality
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__= the marginal cost of production as viewed by the private firm or individual
-less than the true marginal cost |
marginal private cost
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__= the marginal cost of production as viewed by society as a whole
-this equals marginal private cost + marginal external cost |
marginal social cost
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__= the marginal benefit from consumption of a good as viewed by a private individual
-less than true benefit to society |
marginal private benefit
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__= the marginal benefit from conumption of a good from the viewpoint of society
-the true benefit to society - this equals Marg. private benefit + marg. external benefit |
marginal social benefit
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__= the process of providing incentives so that externalities are taken into account internally by firms or consumer
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internalize
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__= procedure that eliminates or internalizes externalities without gvt action other than defining property rights
-define property rights and create market for the externality |
private remedy
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to alleviate problems caused by the externality..
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gvt provision
command and control internalize the externalities taxes, subsidies tradable permits |
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__= rights over the use, sale, and proceeds from a good or resource
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property rights
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__= the idea that private negotioations btw ppl will lead to an efficient resolution of externalities regardless of who has the property rights as long as the property rights are defined
-no matter who is assigned the property rights, the negotiations will lead to an efficient outcome -assignment of property rights determines who receives the compensation |
coase theorem
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__= costs of buying/selling in a market, including search, bargaining , and writing contracts
-must be small compared to the cost of the externality itself -they are the time and efforts needed to reach an agreement |
transaction costs
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__=form of alleviating externalities ;the regulations and restirctions that the gvt uses to correct market imperfections
-through commands, gvt controls what the private sector making externalities internal to the firm, and act like it is taking externalities into account |
command and control
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__= form of alleviating externalities that is good; a gvtally granted license that can be bought and sold
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tradable permits
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