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8 Cards in this Set
- Front
- Back
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External cost (negative externality) |
A cost of an activity that falls on people other than those who pursue the activity |
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External benefit (positive externality) |
A benefit of an activity received by people other than those who pursue the activity |
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Externality |
An external cost or benefit of an activity |
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Clase theorem |
If at no cost people can negotiate the purchase and sale of the right to perform activities that cause externalities, they can always arrive at efficient solutions to the problems caused by externalities |
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"Tragedy of the commons" |
The tendency for a resource that has no price to be used until its marginal benefit falls to zero |
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Positional externality |
Occurs when an increase in one person's performance reduces the expected reward of another in situation in which rewards depends on relative performance |
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Positional arms race |
A series of mutually offsetting investments in performance enhancement that is stimulated by a positional externality |
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Positional arms control agreement |
An agreement in which contestants attempt to limit mutually offsetting investments in performance enhancement |
