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Economics Midterm
Ch. 5
17
Economics
Undergraduate 3
10/24/2008

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Cards

Term
Private cost
Definition
The cost borne by the producer of a good or service.
Term
Social cost
Definition
The total cost of producing a good or service, including both the private cost and any external cost.
Term
Private benefit
Definition
The benefit received by the consumer of a good or service.
Term
Social benefit
Definition
The total benefit from consuming a good or service, including both the private benefit and any external benefit.
Term
Market failure
Definition
A situation in which the market fails to produce the efficient level of output.
Term
Property rights
Definition
The rights individuals or businesses have to the exclusive use of their property, including the right to buy or sell it.
Term
Transaction costs
Definition
The costs in time and other resources that parties incur in the process of agreeing to and carrying out an exchange of goods or services.
Term
Coase theorem
Definition
The argument of economist Ronald Coase that if transactions costs are low, private bargaining will result in an efficient solution to the problem of externalities.
Term
Pigovian taxes and subsidies
Definition
Government taxes and subsidies intended to bring about an efficient level of output in the presence of externalities.
Term
Command and control
Definition
An approach that involves the government imposing quantitative limits on the amount of pollution firms are allowed to emit or requiring firms to install specific pollution control devices.
Term
Rivalry
Definition
The situation that occurs when one person's consuming a unit of a good means no one else can consume it.
Term
Excludability
Definition
The situation in which anyone who does not pay for a good cannot consume it.
Term
Private good
Definition
A good that is both rival and excludable.
Term
Public good
Definition
A good that is both nonrivalrous and nonexcludable.
Term
Free riding
Definition
Benefiting from a good without paying for it.
Term
Common resource
Definition
A good that is rival but not excludable.
Term
Tragedy of the commons
Definition
The tendency for a common resource to be overused.
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