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19 Cards in this Set
- Front
- Back
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Externality
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A benefit or cost that affects someone who is not directly involved in the production or consumption of a good or service.
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Private Cost
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The cost borne by the producer of a good or service.
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Social Cost
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The total cost of producing a good or service including both the private cost and any external cost.
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Private benefit
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The benefit received by the consumer of a good or service.
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Social benefit
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The total benefit from consuming a good or service, including both the private benefit and any external benefit.
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Market Failure
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A situation in which the market fails to produce the efficient level of output
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Property Rights
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The right individuals or businesses have to the exclusive use of their property including the right to buy or sell it.
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Transaction Costs
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The costs in time and other resources that parties incur in the process of agreeing to and carrying out an exchange of goods or services.
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Case theorem
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The argument of economist Ronald Coase that if transactions costs are low, private bargaining will result in an efficient solution to the problem of externalities.
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Pigovian taxes and subsidies
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Government taxes and subsidies intended to bring about an efficient level of output in the presence of externalities.
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Command-and-control approach
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An approach that involves the government imposing quantitative limits on the amount of pollution firms are allowed to emit or requiring firms to install specific pollution control devices.
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Rivalry
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The situation that occurs when one person's consuming a unit of good means no one else can consume
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Excludability
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The situation in which anyone who does not pay for a good cannot consume it.
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Private good
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A good that in both rival and excludable.
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Public good
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A good that is both nonrivalrous and nonexcludable.
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Free riding
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Benefiting from a good without paying for it.
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Common resource
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A good that is rival but not excludable
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Quasi-public goods
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excludable but not rival
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Tragedy of commons
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The tendency for a common resource to be overused.
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