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Microeconomics > Booklet 3 > Flashcards

Booklet 3 Flashcards

1
Q

What is the role of prices in deciding who receives resources - when there is excess demand, price will rise and those with the greatest willingness to pay will get the resources?

A

Allocative/rationing function of prices

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2
Q

What is it called to act entirely in the interests of others without regard to one’s own utility?

A

Altruism

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3
Q

What is it called when someone’s perceptions of something (e.g. the value of a good) are skewed by a single initial piece of information?

A

Anchoring

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4
Q

What term describes how one part in a transaction knows more than the other?

A

Asymmetric information

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5
Q

What is a tendency to give undue importance to the most recent or well-known example of something, even if that is not representative?

A

Availability bias

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6
Q

What is a limit to people’s ability to be rational based on their limited ability to process information, limited time and inaccurate or incomplete information?

A

Bounded rationality

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7
Q

What is a limited ability to put into practice utility-maximising behaviour, even if someone knows what the best course of action is?

A

Bounded self-control

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8
Q

What is a maximum price enforced by law or some other government intervention.

A

Ceiling price

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9
Q

What is it called to design the choices that people take in order that they might make better decisions (without losing the ability to choose)?

A

Choice architecture.

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10
Q

What is the option that will be taken if no conscious decision is taken to change it?

A

Default choice

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11
Q

What is a good which will be over-consumed in a free market because it is worse for consumers than is commonly understood?

A

A demerit good

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12
Q

What is a minimum price enforced by law or some other means such as intervention buying?

A

A floor price

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13
Q

What is the tendency for an individual to be influenced by the context in which information is presented (rather than the information itself) called?

A

Framing

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14
Q

What is a good that has no cost of production that can be produced at no opportunity cost called?

A

A free good

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15
Q

What is it called when the benefit of a good or service is not restricted to those who have paid, giving people an incentive to avoid paying in the hope/expectation that other people will, giving them a “free ride”?

A

The free-rider problem.

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16
Q

What is it called when the cost of government intervention outweighs the benefit?

A

Government failure

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17
Q

What are mental shortcuts or rules-of-thumb.

A

Heuristics

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18
Q

What is it called to Ring-fence the revenue from a tax for a particular (and often related) purpose?

A

Hypothecation

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19
Q

What are the role of prices in changing the behavior of buyers or sellers, for example in triggering an increase in production through higher prices due to an increased profit incentive called?

A

Incentive function of prices

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20
Q

What is a tax on goods and services, either a fixed amount per unit (unit tax) or a percentage added to the pre-tax price (ad valorem tax)?

A

An indirect tax?

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21
Q

What is it called when the information available to a decision-maker is incomplete, inaccurate or otherwise unreliable leading to market failure?

A

Information failure?

22
Q

What is the idea that any action is likely to result in a reaction other than that which was intended (usually negative)?

A

The law of unintended consequences.

23
Q

What is the philosophy that is libertarian in that it promotes freedom to choose, but paternalistic in the sense that it seeks to encourage better choices.

A

Libertarian paternalism?

24
Q

What is situation when the consumer must make a conscious decision one way or another before they are able to continue (i.e. there is no default choice)?

A

Mandated/required choice

25
Q

What relates to a change (usually an increase) of one unit?

A

Marginal

26
Q

What is the benefit to third parties from the consumption of one additional unit?

A

The marginal external benefit

27
Q

What is the cost to third parties from the production of one additional unit?

A

The marginal external cost

28
Q

What is the benefit to consumers from the consumption of one additional unit called?

A

The marginal private benefit

29
Q

What is the cost to producers from the production of one additional unit called?

A

Marginal private cost

30
Q

What is the benefit to society as a whole from the consumption of one additional unit called?

A

Marginal social benefit

31
Q

What is the cost to society as a whole from the production of one additional unit called?

A

Marginal social cost

32
Q

What is a good which will be under-consumed in a free market because it is better for consumers than is commonly understood called?

A

A merit good

33
Q

What is a market that has either disappeared or failed to come into being because of a breakdown of the incentive function of prices called?

A

A missing market

34
Q

What is a negative spillover effect (i.e. cost) to a third party called?

A

A negative externality

35
Q

What term describes when people cannot be prevented from receiving the benefit of a good or service (i.e. this cannot be restricted to those who have paid)?

A

Non-excludable

36
Q

What is it called when consumers cannot avoid the benefit of the consumption of a good?

A

Non-rejectable?

37
Q

What term describes when one person’s use of a good does not reduce the utility available to others from the use of that good?

A

Non-rivalrous

38
Q

What is any aspect of choice architecture that alters behavior in a predictable way without removing choice of significantly changing economic incentives called?

A

Nudges

39
Q

What is a positive spillover effect (i.e. benefit to a third party) called?

A

A positive externality

40
Q

What is a good that is both excludable and rivalrous?

A

A private good

41
Q

What is a good that has some characteristics of a public good or has some of those characteristics under certain conditions?

A

A quasi-public good

42
Q

What are rules enforced by a government (backed by the force of law) called?

A

Regulation

43
Q

What is a situation where a choice architect gives consumers a reduced list of options to choose from (i.e. a shortlist) called?

A

Restricted choice

44
Q

What is the role of prices in providing information to economic agents - e.g. a sudden rise in price might indicate a shortage of a good called?

A

Signaling function of prices

45
Q

What is also known as direct provision, a situation in which the government supplies a good or service itself, often free at the point of consumption?

A

State provision

46
Q

What are accepted patterns of behavior within a society called?

A

Social norms

47
Q

What is the quantity of a good or service produced and consumed that maximizes social welfare (MSB=MSC) called?

A

The socially optimal level of production/consumption

48
Q

What is a sum of money given to firms to encourage the production of a good or service called?

A

A (production) subsidy

49
Q

What is someone who is affected by the production or consumption of good but not directly involved (i.e. not the buyer or seller) called?

A

Third party

50
Q

What are permits that give the holder the right to emit a specific quantity of a pollutant that can be sold by firms who are able to reduce their pollution and bought by firms with higher abatement costs?

A

Tradeable permits

51
Q

What is the depletion of common resources through people prioritizing (often short-term) self-interest over the common good called?

A

The tragedy of the commons

52
Q

What is settling for a level of utility deemed acceptable rather than seeking to utility-maximize called?

A

Utility-satisficing

Microeconomics (7 decks)

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