question
private goods
answer
good/service individually consumed that can be profitably provided by private firms due to rivalry and excludability
question
public goods
answer
good/service characterized by nonrivalry and nonexcludability
question
free-rider problem
answer
inability of providers of a good/service to obtain payment from beneficiaries (due to nonexcludability)
question
externalities (positive/negative)
answer
cost/benefit from production or consumption placed on a third party without compensation
question
Coase theorem
answer
idea that externalities can be resolved though private negotiations of the affected parties (government need not get involved)
question
tragedy of the commons
answer
common ownership results in a lack of incentive for maintenance or improvement (pertaining to a natural resource)
question
economic rent
answer
price paid for the use of land and other resources (fixed supply)
question
fallacy of consumption
answer
false notion that what is true for the individual is necessarily true for the group
question
marginal social cost
answer
total cost to society as a whole for producing one further unit of a product
question
marginal social benefit
answer
total benefit to society as a whole for producing one further unit of a product
question
market for externality rights
answer
market in which firms can buy rights to discharge pollutants
question
asymmetric information
answer
situation where one party to a market transaction has much more information about a product or service than the other (may result in over/underallocation)
question
moral hazard problem
answer
possibility that individuals/institutions will change their behavior as the result of a contract/agreement
question
adverse selection problem
answer
problem arising when information to a contract/agreement known to one party is not known to the other party (causing the other party to incur major costs)
question
cap and trade
answer
regulatory system meant to profitably incentivize companies to reduce pollution
question
market failure
answer
inability of a market to bring about the allocation of resources that best satisfies the wants of society
question
marginal private cost
answer
marginal cost incurred by a firm in producing an extra unit of a good
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