Chapter 9 Flashcards
Externality
an economic activity has either a spillover cost to or a spillover benefit for a bystaner.
Internalizing the Externally
when agents account for the full costs and benefits of their actions.
Property Right
gives someone ownership of a property or resources.
Coase Theorem
private bargaining will result in an efficient allocation of resources.
Transaction Cost
the cost of making an economic change.
Command-and-Control-Regulation
directly restricts the level of production or mandates the use of certain technologies.
Market-Based-Regulatory Approach
internalizes externalizes by harnessing the power of market forces.
Pigouvain Tax (Corrective Tax)
a tax designed to induce agents who produce negative externalities to reduce quantity toward the socially optimal level.
Corrective Subsidies (Pigouvain Subsidies)
designed to induce agents who produce positive externalities to increase quantity toward socially optimal level.
Non-Excludable Good
produced, it is not possible to exclude people from using the good.
Non-Rival Good
a good whose consumption by one person does not prevent consumption by another.
Public Good
both non-rival and non-excludable.
