AP Microeconomics Unit 6: Role of Government Vocabulary

question

Externality

answer

the costs and benefits of production that are not paid by the producer or the consumer

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Positive Externality

answer

a benefit for someone other than the consumer or producer

question

Negative Externality

answer

a cost imposed on someone other than consumer or producer - an adverse side effect

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Marginal Private Benefit

answer

benefit that belongs to the producer or consumer of the good

question

Marginal External Benefit

answer

the spillover benefit to someone else

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Marginal Social Benefit

answer

sum of Marginal Private Benefit and Marginal External Benefit (the benefit to all of society)

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Marginal Private Cost

answer

the cost incurred by the producer or consumer

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Marginal External Cost

answer

the spillover or externality cost to someone else

question

Marginal Social Cost

answer

is equal to the sum of the two costs (the cost to all of society for producing)

question

Coase Theorem

answer

conditions that would allow people to negotiate to fix market failures without the government's help

question

Public Good

answer

items that anyone can have regardless of their ability to pay for it

question

Free Rider Problem

answer

people want the good but do not want to pay for it

question

Benefits Received Principle

answer

tax individuals according to the amount of benefits they receive, regardless of income

question

Ability to Pay Principle

answer

tax individuals according to their income or wealth regardless of what benefit they get from the government.

question

Sherman Anti-Trust Act

answer

made restricting trade illegal (price fixing, separation of markets)

question

Clayton Anti-Trust Act

answer

strengthen gov't powers to promote competition - outlawing tying contracts, interlocking directorates and price discrimination)

question

Lorenz Curve

answer

Graph used to measure income inequality

1 of 17

question

Externality

answer

the costs and benefits of production that are not paid by the producer or the consumer

question

Positive Externality

answer

a benefit for someone other than the consumer or producer

question

Negative Externality

answer

a cost imposed on someone other than consumer or producer - an adverse side effect

question

Marginal Private Benefit

answer

benefit that belongs to the producer or consumer of the good

question

Marginal External Benefit

answer

the spillover benefit to someone else

question

Marginal Social Benefit

answer

sum of Marginal Private Benefit and Marginal External Benefit (the benefit to all of society)

question

Marginal Private Cost

answer

the cost incurred by the producer or consumer

question

Marginal External Cost

answer

the spillover or externality cost to someone else

question

Marginal Social Cost

answer

is equal to the sum of the two costs (the cost to all of society for producing)

question

Coase Theorem

answer

conditions that would allow people to negotiate to fix market failures without the government's help

question

Public Good

answer

items that anyone can have regardless of their ability to pay for it

question

Free Rider Problem

answer

people want the good but do not want to pay for it

question

Benefits Received Principle

answer

tax individuals according to the amount of benefits they receive, regardless of income

question

Ability to Pay Principle

answer

tax individuals according to their income or wealth regardless of what benefit they get from the government.

question

Sherman Anti-Trust Act

answer

made restricting trade illegal (price fixing, separation of markets)

question

Clayton Anti-Trust Act

answer

strengthen gov't powers to promote competition - outlawing tying contracts, interlocking directorates and price discrimination)

question

Lorenz Curve

answer

Graph used to measure income inequality

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