(Key words)(chapter 3) Markets and commodities

Question 1

(definition) Cap and trade

Answer 1

it tries to manage environmental pollutants by enabling companies to pollute up to a certain amount (cap)

If they pollute less, they can trade extra permits (cap) to other companies

Question 2

(definition) Coase theorem

Answer 2

the most efficient outcomes will occur through bargaining between property owners

Question 3

(definition) Externality

Answer 3

positive or negative side effect to a third person

Question 4

(definition) Green certification

Answer 4

it proves that the commodities are environmentally friendly

Question 5

(definition) Greenwashing

Answer 5

when a company promotes to be green through exaggerated or false marketing of a product

Question 6

(definition) Market failure

Answer 6

inefficiency in the production or exchange of a good or service

Question 7

(definition) Market response model

Answer 7

a model that predicts that resource scarcity will cause an increase in price that leads to:

① reduced demand
② increased supply
③ both

Question 8

(definition) Monopoly

also state its consequence

Answer 8

one seller for many buyers

(consequence)
- able to set high price (bc there are no competition)

Question 9

(definition) Monopsony

also state its consequence

Answer 9

many seller for one buyer

(consequence)
- lower price (bc one buyer have the power to control the market)

Question 10

(definition) Transaction costs

Answer 10

People assume transaction costs are low for things such as contracts or price negotiations are low but it tends to be expensive especially when there`s a lot of side effects