Studied by 4 peopleConsumers
________ demand private goods, and profit- seeking suppliers produce goods that satisfy the demand.
Free rider problem
________- Once a producer has provided a public good, everyone including nonpayers can obtain the benefit.
Private goods
________- Produced through competitive market system; offered for sale.
Qualification
________- Ways to overcome information difficulties.
Rivalry
________- When one person buys and consumes a product, it is not available for another person to buy and consume.
Coase theorem
________- Government is not needed to remedy external costs or benefits where (1) property ownership is clearly defined, (2) the number of people involved is small, and (3) bargaining costs are negligible.
negative externalities
Market for externality rights- Market- based approach to correcting ________.
Cap
________- and- trade program- An appropriate pollution- control agency determines the amount of pollutants that firms can discharge into the water or air of a specific region annually while maintaining the water or air quality at some acceptable level.
excludability
Non- ________- No effective way of ________ individuals from the benefit of the good once it comes into existence.
Direct
________ controls- Legislation limiting activities causing negative externalities; raise marginal cost of production.
Demand
________ schedules show the price someone is willing to pay for the extra unit of each possible quantity.
Tragedy of the commons
________- As long as "rights "to air, water, and certain land resources are commonly held and are freely available, there is no incentive to maintain them or use them carefully.
Non rivalry
________- One persons consumption of a good does not preclude consumption of the good by others.
Market demand
________ curve D lies to the left of (or below) the full- benefits demand curve.
Adverse selection problem
________- Arises when information known by the first party to a contract or agreement is not known by the second and, as a result, the second party incurs major costs.
Climate change problem
________- The earths surface has warmed over the last century by about 1 degree Fahrenheit, with an acceleration of warming during the past two decades.
Externalities
________- Cost or a benefit accruing to an individual or group- a third party- that is external to a market transaction.
Cost benefit analysis
________- Used to decide whether to provide a particular public good and how much of it to provide.
Excludability
________- Sellers can keep people who do not pay for a product from obtaining its benefits.
Private goods
Produced through competitive market system; offered for sale
Public goods
Non-rivalry + non-excludability
Free-rider problem
Once a producer has provided a public good, everyone including nonpayers can obtain the benefit
Cost-benefit analysis
Used to decide whether to provide a particular public good and how much of it to provide
Marginal-cost-marginal-benefit rule
Tells us which plan provides the maximum excess of total benefits over total costs or, in other words, the plan that provides society with the maximum net benefit
Externalities
Cost or a benefit accruing to an individual or group—a third party—that is external to a market transaction
Coase Theorem
Government is not needed to remedy external costs or benefits where (1) property ownership is clearly defined, (2) the number of people involved is small, and (3) bargaining costs are negligible
Tragedy of the commons
As long as “rights” to air, water, and certain land resources are commonly held and are freely available, there is no incentive to maintain them or use them carefully. As a result, these natural resources are overused and thereby degraded or polluted
Market for externality rights
Market-based approach to correcting negative externalities
Cap-and-trade program
An appropriate pollution-control agency determines the amount of pollutants that firms can discharge into the water or air of a specific region annually while maintaining the water or air quality at some acceptable level
Optimal reduction of an externality
Occurs when society’s marginal cost and marginal benefit of reducing that externality are equal (MC = MB)
Climate-change problem
The earth’s surface has warmed over the last century by about 1 degree Fahrenheit, with an acceleration of warming during the past two decades
Asymmetric information
Unequal knowledge possessed by the parties to a market transaction
Moral hazard problem
Tendency of one party to a contract or agreement to alter her or his behavior, after the contract is signed, in ways that could be costly to the other party
Adverse selection problem
Arises when information known by the first party to a contract or agreement is not known by the second and, as a result, the second party incurs major costs
Note
Flashcard