Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

ECON 101 > Section 13 > Flashcards

Section 13 Flashcards

You may prefer our related Brainscape-certified flashcards:
Physics 101 flashcards Psychology 101 flashcards Chemistry 101 flashcards Biology 101 flashcards Organic Chemistry 101 flashcards Sociology 101 flashcards
1
Q

Externality

A

An external benefit or cost that is enjoyed or imposed on a third party other than the buyer or seller of the good.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Market Failure

A

When the market outcome differs from the outcome that society considers optimal.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Negative Externality

A

AKA - Supply-side market failure.

Cost imposed on a third party not involved in the production or consumption of the good.

The market over provides the good.

Pollution, drunks, etc.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Marginal Private Costs

A

Marginal cost of producing the good.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Marginal Social Costs

A

Marginal private cost and externality costs.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Tragedy of the Commons

A

When individuals only account for private marginal costs and fail to account for the impact of their actions on others.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Positive Externalities

A

AKA - Demand-side market failure.

External benefit enjoyed by a third party other than the buyer or seller of the good.

Market under produces.

Education, immunizations.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Command-and-control

A

Legislation limiting the amount of the activity along with regulatory bodies to monitor the behavior of the industry.

Are inefficient.

Increase private marginal cost and introduce limits.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Pigouvian Tax

A

When you pay a tax equal to the negative externality. Decreases the equilibrium quantity and increase the price of the good. Less is produced that would cover the negative externality.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Pigouvian Subsidy

A

When you pay a subsidy equal to the amount of the positive externality. Encourages the production and consumption, increasing demand. Shifts the supply curve, producing more goods.

Pell grants, school loans, etc.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Tradable Permits

A

Allow firms to product a certain amount of pollution, firms can use, buy, sell those permits.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Coase Theorem

A

Efficient solutions can be found to externalities if:

  1. Transaction costs are low
  2. Property rights are assigned to one of the parties
  3. They are allowed to negotiate.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Properties of Private Goods

A

Rival: Consumption by one person prevents another from consuming it.
Excludable: Those who don’t pay for the good can’t consume it.
Divisible: Production of the goods can be divided among those who are consuming it.

Shoes, tacos.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Calculating Private Goods

A

Sum up all individual demands - horizontal.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Properties of Public Goods

A

Non-rival: One person consumption does not diminish it for another person.
Non-excludable: Regardless if you pay for it, you can still enjoy it.
Non-divisible: We can’t divide it up among everyone.

Military, light houses.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Free Riders

A

Consuming a good without paying for it.

17
Q

Calculating Public Goods

A

Sum up individual willingness to pay at each quantity level - vertical. Since one persons consumption doesn’t diminish another’s ability to consume it.
Find collective willingness to pay.

18
Q

Properties of Common Resource

A

Non-excludable: You can still enjoy it even if you don’t pay for it.
Rival: Consumption by one will affect others.

Ocean fishing, public lands.

19
Q

Properties of Quasi-Public

A

Excludable: Can you restrict it to those who pay for it.
Non-Rival: Consumption wont’ affect others who consume it as well.

Toll-road, cell phones.

20
Q

Cost/Benefit Analysis

A

When MC = MB

Present value = future value / (1+r)^t

Future value = present value * (1+r)^t

r = interest rate
t - number of years

21
Q

Asymmetric Information

A

Imbalance of information between parties.

22
Q

Adverse Selection

A

Information is known to one party but not the other when the contract is being made.

23
Q

Moral Hazard

A

When the behavior of one changes after the contract is made.

24
Q

Solving Market Failures - Private

A
  1. Require medical history or exam before signing the contract.
  2. Credit scores used to determine interest rates.
  3. Deductibles required to make them bar part of the cost.
  4. Product reports to help people make informed decisions.
  5. Warranties or money back guarantees.
  6. Franchises to keep consistency in all cities
25
Q

Solving Market Failures - Government

A
  1. Standards on quality - training requirements - licenses.
  2. Inspections to promote confidence.
  3. Laws restrict activities like insider trading.
  4. Published reports disclosing industry information like accidents.
26
Q

Failed Government Intervention

A
  1. Principle-agent problem
  2. Don’t account for unintended consequences of actions
  3. Increased bureaucracy
  4. Regulatory Capture - when the agency acts in interest of those they are assigned to regulate.
27
Q

Principle Agent

A

Conflicts that arise when tasks are delegated by principles to agents - agents then don’t act in the best interest of the principles.

28
Q

Consumer Surplus

A

The extra value that a consumer gains above what he was willing to pay for a product.

Consumer surplus and price are inversely related - Lower prices increase surplus.

29
Q

Producer Surplus

A

The extra value that a producer gains when the actual price for a product is higher then the minimum acceptable price.

Producer surplus and equilibrium price have a direct relationship, lower prices reduce producer surplus.

30
Q

Productive Efficiency

A

Minimizes the per unit cost by using the best combination of resources.

31
Q

Allocative Efficiency

A

When the correct quantity is produced.

32
Q

Public Choice Theory

A

Analysis of government decision making, politics, and elections.

33
Q

Logrolling

A

Trading of votes to secure desired outcomes.

34
Q

Paradox of voting

A

Society may not be able to rank its preferences consistently through paired-choice majority voting.

35
Q

Special-interest Effect

A

Small number of people get a government policy that is not in the interest of the general population.

36
Q

Earmarks

A

Projects that only benefit a local constituents.

37
Q

Rent Seeking

A

Special benefits at taxpayers expense.

ECON 101 (8 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions