Final exam Flashcards
Externality
a market exchange that affects a third party who is outside or “external” to the exchange; sometimes called a “spillover”
Free Rider
those who want others to pay for the public good and then plan to use the good themselves; if many people act as free riders, the public good may never be provided
Non-Excludable
when it is costly or impossible to exclude someone from using the good, and thus hard to charge for it
Non-Rival
even when one person uses the good, others can also use it
Bilateral Monopoly
a labor market with a monopsony on the demand side and a union on the supply side
Monopsony
a labor market where there is only one employer
Median Voter Theorem
theory that politicians will try to match policies to what pleases the median voter preferences
Poverty Trap
antipoverty programs set up so that government benefits decline substantially as people earn more income—as a result, working provides little financial gain
Adverse Selection
when groups with inherently higher risks than the average person seek out insurance, thus straining the insurance system
Moral Hazard
when people have insurance against a certain event, they are less likely to guard against that event occurring
Dumping
selling internationally traded goods below their cost of production
Club Good
Non-Rival; Excludable
Private Good
Rival, Excludable
Common Resource
Rival, Non-Excludable
Public Good
Non-Rival, Non-Excludable
Whose welfare increases when there is a subsidy implemented to optimize on a positive externality from consumption?
Producers & Consumers
Who does the labor force consist of?
Unemployed + Employed
How do you find the unemployment rate?
Unemployed/Labor force
How do you find the Labor Force participation rate?
Labor Force/Working Population
Asymmetric Information
2 parties involved in an economic transaction have an unequal amount of information–>leads to market failures
Imperfect Information
Buyer, seller, or both are not 100% certain about the qualities of the items being bought/sold
In consumption externalities, which curve is affected?
The demand curve
In production externalities, which curve is affected?
The supply curve
Negative externalities are handled with
a tax
Positive externalities are handled with
a subsidy
