Homework 2 Definitions

Question 1

Open access equation

Answer 1

OA = p * q(n) = (1+r) * c

Question 2

Efficiency equation

Answer 2

Eff = p * q(n) + p * q ‘ (n) * n = (1+r) * c

Question 3

When the welfare of some agent depends in part activities under the control of some other agent, and there is no means of compensation for the benefit or harm resulting

Answer 3

Externality

Question 4

Markets produce too much; “negative externality”

Answer 4

External cost

Question 5

The total cost to society for producing one additional unit of a good

Answer 5

Marginal social cost

Question 6

The total benefit to society for producing one additional unit of a good

Answer 6

Marginal social benefit

Question 7

Pigouvian tax

Answer 7

A tax on output equal to the MEC

Question 8

My use of a good reduces the quantity of quality available for others to use

Answer 8

Rival (divisible)

Question 9

My use of a good does not reduce quality or quantity

Answer 9

Non - rival (indivisible)

Question 10

Owner can prevent others from using a good

Answer 10

Exclusive

Question 11

Non- excludable

Answer 11

Owner cannot exclude anyone from using a good

Question 12

A rival and excludable good

Answer 12

Private good

Question 13

A non rival and non excludable good

Answer 13

Public good

Question 14

Property owned by individuals or a group of individuals

Answer 14

Private property

Question 15

Accessible by open access and shared resources characterized by non- exclusivity and rivalry

Answer 15

Open access resource

Question 16

Refer to entitlements divining the rights, privileges, and limitations for use of a resource

Answer 16

Property rights

Question 17

All resources privately owned and all entitlements are completely specialized

Answer 17

Universality

Question 18

All benefits and costs accrue to owner or user only

Answer 18

Exclusivity

Question 19

All property is transferable in voluntary exchange

Answer 19

Transferability

Question 20

Rights protected by law are not subject to arbitrary seizure

Answer 20

Enforceability

Question 21

Opportunity cost of making transactions

Answer 21

Transactions costs

Question 22

If property rates are clearly assigned, and transactions are costless, then private negotiation between effective parties will lead to an efficient resource allocation, regardless of the initial assignment of property rights

Answer 22

Coase theorem

Question 23

Total benefit minus total cost

Answer 23

Net benefit