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Econ Final Part 2
N/A
33
Economics
Undergraduate 1
12/04/2012

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Term
Competition
Definition
"Playing to win," drives down costs
Term
Perfect Competition
Definition
When economists use their term to refer to a state of affairs; a homogeneous state with no barriers preventing the mobility of resources
Term
dynamic competition
Definition
When two compete for pricing, they are competing for both innovation and time. Using more time to create a product allows for more innovation, however it is best to produce a product while demand for the product is high.
Term
Margins of competition
Definition
Price, Quality, Cost, Innovation
Term
Monopoly
Definition
A single seller of a product or service
Term
Sources of Monopoly
Definition
Law, Natural Monopoly, and ownership of a scarce input
Term
Natural Monopoly
Definition
Because of economies of scale, only one firm fits in a market
Term
Price discrimination
Definition
Charging different prices to different customers for the same product when the price differences do not arise from differences in cost
Term
Arbitrage
Definition
When consumers purchase a product & resell it at a higher price
Term
Two-part tariff
Definition
Selling a product at one initial price and then charging additionally for each time the service is used
Term
Externality
Definition
The uncompensated effect on one person's actions on the well-being of a bystander
Term
Negative externality
Definition
When the effect on the bystander is adverse
Term
Positive externality
Definition
When the effect on the bystander is beneficial
Term
technological externalities
Definition
Create inefficiency because they are outside the price system
Term
internalizing an externality
Definition
Involves altering incentives so that people take account of the external effects of their actions
Term
institutional(Cosean)approach
Definition
Changes the structure of property rights so that participants take into account all the actions of their behaviors
Term
fiscal(pigovian) approach
Definition
Taxes or subsidies to equate private cost(benefit) and social cost(benefit)
Term
command-and-control approaches
Definition
non-economic command and control regulation of technology or behavior
Term
the coase theorem
Definition
If private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own
Term
transaction costs
Definition
The costs that parties incur in the process of agreeing to and following through on a bargain
Term
Excludability
Definition
When others can be prevented from using a good
Term
Rivalry in consumption
Definition
If one person's use of a good diminishes other people's use of a good
Term
Private goods
Definition
Goods that are both excludeable and rival in consumption
Term
Public goods
Definition
Goods that are neither excludaeble nor rival in consumption
Term
Common resources
Definition
Goods that are rival in consumption but not excludeable
Term
Quasi-public goods
Definition
Goods that are excludeable but not rival in consumption
Term
law of one price
Definition
Identical products should be the same price everywhere, assuming no transaction costs
Term
yield management
Definition
Continually adjusting prices to take changing demand into account
Term
Pigovian Tax
Definition
A tax to bring about efficient level of output in the presence of externalities
Term
The cost of the externality
Definition
A Pigovian tax must be set equal to what in order to be efficient
Term
Economically efficient
Definition
When marginal benefit equals marginal cost
Term
free riding
Definition
Benefitting from a good without paying for it
Term
tragedy of the commons
Definition
The tendency for a common resource to be overused
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