• Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off
Reading...
Front

Card Range To Study

through

image

Play button

image

Play button

image

Progress

1/16

Click to flip

Use LEFT and RIGHT arrow keys to navigate between flashcards;

Use UP and DOWN arrow keys to flip the card;

H to show hint;

A reads text to speech;

16 Cards in this Set

  • Front
  • Back
Externality
The uncompensated impact of one person's actions on the well-being of a bystander
Internalizing the externality
altering incentives so that people take account of the external effects of their actions
Negative externalities lead markets to produce a larger quantity than is socially desirable

Positive externalities lead markets to produce a smaller quantity than is socially desirable
True

to remedy this problem, the government can internalize the externality by taxing goods that have negative externalities and subsidizing goods that have positive externalities
Transaction Costs
The costs that parties incur in the process of agreeing to and following through on a bargain or contract
Coase Theorem
Private economic actors can solve the problem of externalities among themselves. Whatever the initial distribution of rights, the intereste parties can always reach a bargain in which everyone is better off and the outcome is efficient
Excludability
The property of a good whereby a person <i><b>can</i></b> be prevented from using it
Rivalry in Consumption
The property of a good whereby one person's use diminishes other people's use
4 Types of Goods (REVEW PAGE 226)
Private

Natural Monopolies

Common Resources

Public Goods
Private Goods
goods that are <i>both</i> excludable and rival in consumption

-clothing
ice cream cones
-congested toll roads
Public Goods
Neither excludable nor rival in consumption

-Tornado Siren
-National Defense
-Uncongested nontoll Roads


Because public goods are NOT excludable, the free-rider problem prevents the private market from supplying them

In deciding whether something is a public good, one must determine who the beneficiaries are and whether these beneficiaries can be excluded from using the good.
Common Resources
Goods that are rival in consumption but not excludable

-Fish in the ocean
-The environment
-Congested nontoll roads
Natural Monopoly
A good IS excludable but NOT rival in consumption

-Fire Department
Free Rider
a person who receives the benefit of a good but avoids paying for it

Free rider problem occurs when the # of beneficiaries is large and exclusion of any one of them is impossible.

If a lighthouse benefits many ship captains, it is a public good. Yet if it primarily benefits a single port owner, it is more like a private good.
What are 3 of the most important Public Goods?
National Defense

Basic Research

Fighting Poverty
Cost Benefit Analysis
A study that compares the costs and benefits to society of providing a public good
Tragedy of the Commons
A parable that illustrates why common resources are used more than is desirable from the standpoint of society as a whole

Teaches us that when one person uses a common resource, he or she diminishes other peoples enjoyment of it. (sheep overgrazing a pasture)

modern day example = Environmental degradation