Term
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Definition
| -Produced through the competitive market system. -Goods offered for sale in stores/shops |
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Definition
| One person buys/consumes a product, it is not available for another person to buy/consume |
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Definition
| Sellers can keep people who do not pay for a product from obtaining its benefits. Physically exclude. |
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Definition
| Distinguished by nonrivalry and nonexcludability |
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Term
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Definition
| One person's consumption of a good does not preclude consumption of the good by others. Everyone can obtain the benefit of it |
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Definition
| There i sno effective way of excluding individuals from the benefit of a good. If it is physically impossible to restrict |
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Definition
| Once a producer has provided a public good, everyone including nonpayers can obtain the benefit |
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Term
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Definition
| Used to decide wheter to provide a particular public good and how much of it to provide. |
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Term
| Marginal-Cost-Marginal-Benefit Rule |
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Definition
| Tells us which plan provides the maximum excess of total benefits over total costs. |
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Term
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Definition
| Cost or beneift accruing to an individual or group, that is external to a market transaction |
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Term
| Negative Externalities/Example |
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Definition
-Breathing polluted air, second-hand smoke
-There is an overproduction of the related product and an overallocation of resources to this product at a low price |
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Term
| Positive Externalities/Example |
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Definition
-The benefit of having everyone else cured against some disease
-There is an underporduction and underallocation of resources at also a low price |
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Term
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Definition
| Government is not needed to remedy external costs or benefits where property ownership is clearly defined, the number of people involved is small, and bargaining costs are negligible |
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Term
| Government Intervention to Externalities |
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Definition
-Can use direct controls and taxes to counter negative externalities
-Can provide subsidies or public goods to deal with positive externalities |
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Term
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Definition
| Used to correct the underallocation of resources by giving a reward to consumers of the product |
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Term
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Definition
| A specific tax in reverse. Payments from the government that decrease producers' costs. |
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Definition
| Where the Government decides to provide the product as a public good. |
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Definition
| The air, rivers, lakes, oceans, and public lands are all objects for pollution because the rights to use those resources are held "in common" by society |
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Term
| Market for Externality Rights |
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Definition
| A market-based approach to correcting negative externalities |
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Term
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Definition
| An appropriate pollution-control agency determines the amount of poulltants that firms can discharge into the air while maintaining the air quality at some level, then companies trie to lower their emissions so they can trade the rest of their cap to other companies to reduce |
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Term
| Optimal Reduction of an Externality |
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Definition
| Occurs when society's marginal cost and marginal benefit of reducing that externality are equal. |
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Term
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Definition
| That the earth's surface has warmed over the last century by about 1 degree, with more rapid warming in the last 20 years. Suggesting that human activity is a contributing factor |
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Definition
| Unequal knowledge possessed by the parties to a market transation |
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Definition
| The 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. |
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Term
| Adverse Selection Problem |
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Definition
| Arises when information known by the first party to a contract or agreement is not known by the second and the second party incurs major costs |
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Definition
| The trading of votes to secure favorable outcomes |
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Term
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Definition
| Situation in which society may not be able to rank its preferences consistently through paired-choice majority voting |
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Term
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Definition
| Under majority rule and consistent voting preferences, the median voter wil in a sense determine the outcomes of elections |
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Term
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Definition
| Pro-Market, Anti-Government |
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Term
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Definition
| Inefficiency due to certain characteristics of the public sector |
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Term
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Definition
| Any outcome of the political process whereby a small number of people obtain a government program or policy that gives them large gains at the expense of a much greater group who individually suffer small losses |
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Term
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Definition
| Specifivally designated authorizations of expenditure |
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Term
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Definition
| The appeal to government for special benefits at taxpayers' or someone else's expense |
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Term
| Benefits-Received Principle |
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Definition
| Taxation that asserts that households and businesses should purchase the goods and services of government in the same way they buy other goods, those who benefit most from public goods should pay the taxes necessary to finance them |
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Definition
| Tasation that asserts that the tax burden should be apportioned according to taxpayers' income and wealth. |
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Term
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Definition
| Tax's average rate increases as income increasices |
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Term
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Definition
| Tax's average rate declines as income increases. Suppose tax is $20 for everyone but that 20 could mean alot for a poor person and little for rich |
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Term
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Definition
| Tax's average rate remains the same regardless of size of income |
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Term
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Definition
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Term
| Proportional Tax Examples |
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Definition
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Term
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Definition
| Sales Taxes, Payroll Taxes, Property Taxes |
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Term
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Definition
| The resting place of a tax |
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Term
| Efficiency Loss of the Tax |
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Definition
| Society's sacrifice of net benefit, because the tax reduces production and consumption of the product below their levels of economic efficiency |
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Term
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Definition
| Government may wish to impose progressive taxes as a way to redistribute income. Such as taxes on luxury items |
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Term
| Reducing negative Externalities |
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Definition
| Analysis of the efficiency loss of a tax assumes no negative externalities arising from either the production or consumption of the product in question |
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