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Astro 1 Unit 1 Exam > Econ Exam 3 > Flashcards

Econ Exam 3 Flashcards

1
Q

when a good benefits a third party/ the social benefit is higher than private benefit

A

positive externalities

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2
Q

when a good poses an additional cost to a third party/ social cost is higher than private cost

A

negative externalities

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3
Q

the socially optimal output is when…

A

marginal social cost equals marginal social benefit

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4
Q

What is used to get rid of deadweight loss and reach the socially optimal output?

A

Taxes(negative externalities) and Subsidies(positive externalities)

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5
Q

Private bargaining over property rights can lead to an optimal and efficient outcome without government intervention.

A

Coase Theorem

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6
Q

What is an example of Coase Theorem?

A

Roommate smoking in the dorm, government is not going to intervene, private bargaining is needed (paying them to smoke outside)

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7
Q

a factor that allows you to limit access to a good(only the person the bought it can use it)

A

excludability

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8
Q

a factor that says a good is depleted one used

A

rival

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9
Q

what type of good that is excludable and rival?

A

private good(ice cream)

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10
Q

what type of good is excludable and nonrival?

A

club good(gym/country club amenities)

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11
Q

what type of good is nonexcludable and rival?

A

common resource(fishing, trees)

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12
Q

what type of good is nonexcludable and nonrival?

A

public good(parks, roads, national defense)

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13
Q

What is it called when people who do not pay for a good but still use it?

A

free-rider problem

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14
Q

What is it called when people share a resource and they extract from it as much as possible, ruining it for everyone?

A

tragedy of the commons(shared farm land)

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15
Q

The measure of preference of satisfaction gained from a good

A

utility

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16
Q

Marginal utility goes down as quantity goes up due to a decrease in satisfaction as quantity increases

A

diminishing marginal utility

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17
Q

What says people will choose the next good with the highest marginal utility per dollar until they run out of money, optimally where marginal utility per dollar is equal for both goods?

A

Optimal bundle with a budget constraint

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18
Q

value you receive on average

A

expected value

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19
Q

probability of an event multiplied by the utility function with that payoff

A

expected utility

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20
Q

a sure thing is preferred to a gamble with the same expected value

A

risk aversion

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21
Q

a sure thing is the same a gamble with the same expected value (maximize expected value)

A

risk neutral

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22
Q

a gamble is preferred to a sure thing with the same expected value

A

risk seeking

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23
Q

when one party knows more than the other when the decision occurs

A

asymmetric information

24
Q

when the party with full information only sells or buys when they have an incentive to, leading to higher quality goods not being traded(insurance sets higher prices so low risk people do not buy)

A

adverse selection

25
Q

What is an example of how asymmetric information leads to adverse selection?

A

Used car problem: you are selling 3 cars, their value is based on their condition, you know their value and condition, buyer knows nothing, you will offer them the cheapest car no matter how much they are willing offer to maximize profit

26
Q

Why is the health care system in the united states so expensive?

A

insurance, medicare, and Medicaid, uninsured people, inelastic demand, people are not proactive about health, end of the life care is expensive and the population is aging

27
Q

Who are the players in the United States health care system?

A

consumers, producers, pharma companies, insurance companies

28
Q

people who need healthcare

A

consumers

29
Q

hospitals, any health clinic or doctor

A

producers

30
Q

suppliers of health products and medicine(Johnson and Johnson, Pfizer)

A

pharmaceutical companies

31
Q

intermediary between consumers and producers

A

insurance companies

32
Q

how much you pay to go to the doctor

A

copay

33
Q

how much you pay each month for the health insurance whether you go to the doctor or not

A

premium

34
Q

amount that must be paid before the policy benefits kick in

A

deductible

35
Q

percentage of costs paid after the deductible is hit

A

coinsurance payment

36
Q

how do insurance companies control for asymmetric information

A

gather information to access your risk (smoking, age, bmi, family history)

37
Q

people are riskier if they are protected from risk(insurance companies is to raise rates after an accident)

A

moral hazard

38
Q

you expect the doctor to act in your best interest, if there is no monitoring of doctors, they may not act in your best interest

A

principal-agent problem(opioid crisis)

39
Q

what measures choices because people are really bad at measuring probability

A

behavioral economics

40
Q

people are averse to guilt causing har to others

A

guilt aversion

41
Q

the belief that the outcome has not occurred yet are more likely to occur

A

gambler’s fallacy

42
Q

the belief that experiencing success with a random event means further success is likely

A

hot hand fallacy

43
Q

people are averse to things that are unfair

A

inequality aversion

44
Q

how information is presented

A

framing

45
Q

what information is presented

A

priming

46
Q

people want to to avoid changing the status-quo because they are comfortable with it

A

status-quo bias

47
Q

planning to do something in the long run but short-run self makes different decisions(planning to cook dinner but passing a fast food restaurant and doing that instead)

A

intertemporal decisions making

48
Q

people may be irrational to avoid regret(not selling a lottery ticket for regret that it could win)

A

regret avoidance

49
Q

people become less risk averse when presented with a choice between risky scenarios

A

Allais paradox

50
Q

choice between three doors with a 1/3 chance of getting a car without switching and 2/3 chance of getting a car when they do switch

A

monty hall problem

51
Q

what makes wage discrimination calculations tough(gender wage gap)

A

compensating differentials

52
Q

name a compensating differential

A

differences in wages offset desirability of the job, jobs in cities have higher wages to reflect high costs of living, more educated people are paid more because they are harder to replace

53
Q

the economic value of a person’s skills, education, experience, work ethic that leads to higher wages

A

human capital

54
Q

a measurement of income distribution and its equation

A

gini coefficient (A/A+B)

55
Q

a graph comparing percentage of the population to the percentage of total income they earn

A

lorenz curve

56
Q

if the gini coefficient is closer to 0 this means(lorenz curve is closer to the 45-degree line)…

A

more equality

57
Q

if the gini coefficient is closer to 1 this means(bowed out lorenz curve)…

A

more inequality

Astro 1 Unit 1 Exam (5 decks)

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