Definotions

Question 1

Public good

Answer 1

A good that is non excludable and non rejectble

As consumers cannot refuse the benefit of the good eg street lights

Question 2

Private good

Answer 2

A good that is rivalrous and excludable

(An apple )

Question 3

Define quasi public good

Answer 3

Eg could be excludable but non rivalrous
And vice Versa

A good that has some characteristics of a public good

Question 4

Indirect tax

Answer 4

Tax on goods and services

Question 5

Marginal

Answer 5

Relating to an increase in one unit

Question 6

Marginal private cost

Answer 6

The cost to those directly involved (producer)of one additional unit

Question 7

Marginal external cost

Answer 7

The cost to the third parties from the production of one additional unit

Question 8

Marginal social cost

Answer 8

Cost to society as a whole of economic activity

MSC=MPC+MEC

Question 9

Marginal private benefit

Answer 9

Benefit to those not directly involved (ie the consumer ) of one additional unit

Question 10

Margins external benefits

Answer 10

Benefit to third parties from the consumption of an additional unit

Question 11

Marginal social benefit

Answer 11

The benefit to society as a whole from the production/consumption of a good
MSB=MPB+MEB

Question 12

Privately optimal level of production/ consumption

Answer 12

Quantity of a good that will produced/consumed in a free market

MPB=MPC

Question 13

Socially optimal level of production /consumption

Answer 13

Quantity produced/consumed of a good that would be best for society

MSB=MSC

Question 14

Floor price

Answer 14

Minimum price enforced by law and or some other means such as intervention buying

Question 15

State provision

Answer 15

Something provided by the government often free at the point of consumption

Question 16

Property rights

Answer 16

Legal control or ownership of a good
(Extension of property rights)

Question 17

Define tragedy of the commons

Answer 17

Refers to the effect of an individuals acting in a way where there own self intrest is contrary to what is best for society

Question 18

Assymetric information

Answer 18

When one party knows more about another

Question 19

Subsidies

Answer 19

Sum of money given by they government to encourage the production of goods and services

Question 20

Regulation

Answer 20

Laws passed and enforced by the govement

Question 21

Maximum price

Answer 21

No seller can charge the price above the one imposed by the government

Question 22

Tradable permits

Answer 22

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

Question 23

Information provision

Answer 23

Consumers may be unaware of the negative external costs to third parties

Question 24

Bounded rationality

Answer 24

The limitations to stop humans behaving rationally due to
-humans mind has limited amount of information they can process
-information is incomplete and often unreliable
-time available to make decisions is limited

Question 25

Bounded self control

Answer 25

Limit to put into practice utlitity maximising even if someone knows what the best course of action would be
Eg losing weight
Stoping smoking

Question 26

Utility satisficing

Answer 26

Setting for a level of utility deemed acceptable rather than utility maximising

Question 27

Complete failure

Answer 27

Where there is a missing market,the market does not supply the products at all

Question 28

Partial market failure

Answer 28

When the market produces a good but it’s at the wrong quantity or price