Chapter 3 for Test #1

Question 1

Market Response Model

Answer 1

A model that predicts economic responses to scarcity of a resource will lead to increases in prices that will result either in decreased demand for that resource or increased supply, or both.

Question 2

Coase Theorem

Answer 2

A thesis based in neoclassical economics, holding that externalities can be most efficiently controlled through contracts and bargaining between parties, assuming the transaction costs of reaching a bargain are not excessive.

Question 3

Externality

Answer 3

The spillover of a cost or benefit, as where industrial activity at a plant leads to pollution off-site that must be paid for by someone else.

Question 4

Market Failure

Answer 4

A situation or condition where the production or exchange of a good or service is not efficient; this refers to a range of perverse economic outcomes stemming from market problems like monopoly or uncontrolled externalities.

Question 5

Transaction Costs

Answer 5

In economics, the cost associated with making an exchange, including, for example, drawing a contract, travelling to market, or negotiating a price; while most economic models assume low transaction costs, in reality these costs can be quite high, especially for systems with high externalities.

Question 6

Monopoly

Answer 6

A market condition where there is one seller for many buyers, leading to perverted and artificially inflated pricing of goods or services.

Question 7

Monopsony

Answer 7

A market condition where there is one buyer for many sellers, leading to perverted and artificially deflated pricing of goods or services.

Question 8

Cap and Trade

Answer 8

A market-based system to manage environmental pollutants where a total limit is placed on all emissions in a jurisdiction (state, country, worldwide) and individual people or firms possess transferable shares of that total, theoretically leading to the most efficient overall system to maintain and reduce pollution levels overall.

Question 9

Greenwashing

Answer 9

The exaggerated or false marketing of a product, good, or service as environmentally friendly.

Question 10

Green Certification

Answer 10

Programs to certify commodities for the purposes of assuming their ecological credentials, such as organically grown vegetables or sustainably harvested wood products.

Question 11

Prisoner’s Dilemma

Answer 11

A theoretical game situation in which multiple individuals making decisions in pursuit of their own interests tend to create collective outcomes that are non-optimal for everyone.

Question 12

Game Theory

Answer 12

A form of applied mathematics used to model and predict people’s behavior in strategic situations where people’s choices are predicated on predicting the behavior of others.

Question 13

Institutions

Answer 13

Rules and norms governing collective action, especially referring to rules governing common property environmental resources, like rivers, oceans, or the atmosphere.

Question 14

Common Property

Answer 14

A good or resource (e.g., pasture or oceans) whose characteristics make it difficult to fully enclose and partition.