chapter 9 Flashcards
Negative externality
when the production or consumption of a product results in a cost to a third party
positive externality
if the production and consumption of a good or service benefits a third party not directly involved in the market transaction.
property rights
gives someone ownership of a property or resources
pigouvian taxes
The tax necessary to incentivize a firm to produce the socially optimal level of output
Pigouvian subsidies
The subsidy necessary to make an economic agent increase consumption to the socially optimal level
private goods/ public
Private: the quantity gets summed up across all individuals
Public: the price gets summed up across all individuals.
common pool resource goods
an open-access resource susceptible to overexploitation because people have an incentive to consume as much as they want
club goods
products that are excludable but non-rival
tragedy of the commons
an economic problem of overconsumption, under investment, and ultimately depletion of a common pool resource
coase theorem
private bargaining will result in an efficient allocation of resources, Property Right gives
someone ownership of a property or resources, Transaction costs are the costs of making an
economic exchange.
Command-and-Control Policies
in which the government directly regulates the allocation of resources.
Market-Based Policies
in which the government provides incentives for private organizations to internalize the externality.
Rivalrous
rival: Goods that only one person can consume at a time.
nonrival: Goods that more than one person at a time can consume.
Exclusivity
Excludable goods: Must be paid for in order to consume them.
Non excludable goods: Can be consumed, even if they are not paid for.
