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31 Cards in this Set
- Front
- Back
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• Adverse Selection
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the pattern in which insurance tends to be purchased disproportionally by those who are most costly for companies to insure.
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• Asymmetric Information
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situations in which buyers and sellers are not equally well informed about the characteristics of good and services of goods and services for sale in the marketplace
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• Better than fair gamble
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a gamble whose expected value is positive.
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• Costly to fake principal
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to communicate information credibly to a potential rival, a signal must be costly or difficult to fake.
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• Disappearing political discourse
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the theory that people who support a position may remain silent because speaking out would create a risk of being misunderstood.
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• Expected value of a gamble
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the sum of the possible outcomes of the gamble multiplied by their respective probabilities
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• Fair gamble
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a gamble whose expected value is zero.
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• Free Rider problem
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an incentive problem in which to little of a good or service is produced because nonpayer’s cannot be excluded from using it
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• Lemons model
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George Akerlof’s explanation of how asymmetric information tends to reduce the average quality of goods offered for sale.
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• Moral hazard
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the tendency of people to expend less effort protecting those goods that are insured against theft or damage.
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• Risk adverse person
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someone who would refuse any fair gamble.
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• Risk neutral person
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someone who would accept any gamble that is fair or better.
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• Statistical discrimination
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the practice of making judgments about the quality of people, goods, or services based on the characteristics of the groups to which they belong
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• Compensation wage differential
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a difference in the wage rate- negative or positive- that reflects the attractiveness of a job’s working conditions.
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• Customer discrimination
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the willingness of a consumers to pay more for a product produced by members to a favored group, even if the quality of the product us unaffected
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• Earned-income tax credit (EITC)
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a policy under which low-income workers receive credits on their federal income tax
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• Employer discrimination
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an arbitrary preference by an employer for one group of workers over another
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• Human capital
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an amalgam of factors such as education. Training, experience, intelligence, energy, work habits, trustworthiness and initiative that affects the value of a worker’s marginal product
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• Human capital theory
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a theory of a pay determination that says a worker’s wage will be proportional to his or her stock of human capital.
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• In-kind transfer
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a payment made not in the form of cash, but in the form of a good or service
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• Labor union
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a group of workers who bargain collectively with employers for better wages and working conditions
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• Marginal product of labor (MP)
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the additional output a firm gets by employing one additional unit of labor
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• Means-tested
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a benefit program whose benefit level declines as the recipient earns additional income
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• Negative income tax (NIT)
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a system under which the government would grant every citizen a cash payment each year, financed by an additional tax on earned income.
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• Personal responsibility act
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in 1996 federal law that transferred responsibility for welfare programs from the federal level to the state level and place five-year lifetime limit of payment of AFDC benefits to any given recipients
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• Poverty threshold
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the level of income below which the federal government classifies a family of poor
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• Value of marginal product of labor (VMP)
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the dollar value of the additional output a firm gets by employing one additional unit of labor.
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• Winner-take-all labor market
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one in which small differences in human capital translates into large differences in pays
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• First-dollar insurance coverage
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insurance that pays all expenses generated by the insured activity
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• Health maintenance organization (HMO)
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a group of physicians that provides health services to individuals and families for a fixed annual fee
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• Workers compensation
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a government insurance system that provides benefits to workers who are injured on the job
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