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9 Cards in this Set
- Front
- Back
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Define Optimal Mix of Output?
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The most desirable combination of output attainable with existing resources, technology, and social values.
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Explain how the market reaches an optimal mix of output.
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By using the market mechanism, which uses market prices and sales to reach that optimal output.
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Define Market failure.
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An imperfection in the market mechanism that prevents optimal outcomes.
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What are the major causes of a market failure?
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Public goods, Market power, externalities, equity.
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Define Private good.
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A good or service that when consumed by on person excludes consumption by others.
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Define public good.
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A good or service when consumed by one person does not exclude consumption by others.
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Explain free rider dilemma.
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Not matter what there will all be those who siphon of the the work of others.
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Why are public goods under-produced? Why are private goods over-produced?
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Both are because of the existence of free riders. Consumers do not want to share there consumption.
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What is externality?
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Cost of a market activity from a third party; the difference between the social and private market costs of a market activity.
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