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Flashcards in Chapter 2 Deck (22):
1

Spontaneous Order

People organize themselves and interact efficiently, if given the freedom to do so

2

Natural Experiment

When one half of a country is in control of their economic freedom while the other side of the country is not free

3

GDP

Gross Domestic Product-

4

Free Market Prices Function

-give incentives to produces to satisfy customers
-ration goods to consumers who most want them
-give incentives to conserve scarce resources

5

Ways of Spending Money-YOURS/YOURSELF

Economize and seek highest value

6

Ways of Spending Money-YOURS/SOMEONE ELSE

Economize, but don't seek highest value

7

Ways of Spending Money-SOMEONE ELSES/YOURSELF

Don't economize, but seek highest value

8

Ways of Spending Money- SOMEONE ELSES/SOMEONE ELSE

Don't economize and don't seek highest value

9

Rational Ignorance

refusing to expend resources to gather information the will almost certainly NOT lead to a change in the quality of life

10

Fallacy to Division

thinking that what is true for a group must be true for all the individuals of the group

11

Individual Choice

Where individuals decide for themselves

12

Authoritarian Choice

involves a single individual or governing body making decisions for the populace.

13

Democratic Choice

an authoritarian choice made by individuals voting on decisions for the entire populace

14

Regulation

To make regular or to control.
We may desire the benefits of regulation but also the costs

15

Direct Costs of Regulation

Government Administrative Costs
Compliance Cost

16

Indirect Cost of Regulation

results from changes in behavior of firms and individuals due to the regulation

17

Government Administrative Costs

Sacrificed in order to pay government employees to monitor the regulatory program and enforce the statutes

18

Compliance Cost

How much must be sacrificed by the regulated entity to follow the law, which includes reporting costs, planning and admin. costs, and consulting costs.

19

Businesses may like some regulation because?

The larger businesses may want regulation because they can afford the regulation and the smaller businesses cannot so that makes it to where the big businesses don't have much competition.

20

Rent Seeking

involves individuals expending resources to prosper, not by creating value, but by using the LEGAL and REGULATORY systems

21

Bootleggers and Baptists

the bootleggers can only make money if alcohol is illegal and the Baptists want it illegal they use Baptists to as stalking horses in the regulatory process

22

Law of Unintended Consequences

the warnings that intervening in a complex system may create unanticipated and often undesirable outcomes