Final Flashcards
externality
when a person engages in an activity that influences the well-being of bystander but neither pays nor receives compensation for effect
positive externality example
restoration of historic buildings, research new technologies
negative externality example
pollution from cars, noise from barking dogs
internalise an externality
altering incentives so people take into account external effects of actions
effect of subsidies on externaity
internalises externality
patent protection
protect rights of inventors by giving them exclusive use of invention for period
excludability
can you prevent people from using good
rivalrous
does one person’s use of a good affect another’s ability to use
private goods
excludable, rivalrous - ice cream
club goods
excludable, non-rivalrous - fire protection
common resources
not excludable, rivalrous - fish in ocean
public goods
not-excludable, non-rivalrous - national defense
free rider
reaps benefit without paying
cost-benefit analysis
study that compares costs/benefits to society of providing public good
goal of firm
maximise profits
total revenue
amount firm receives for sale of output
total cost
market value of inputs a firm uses in production
opportunity cost
all those things that must be forgone to acquire that item
cost of production
includes opportunity costs (implicit costs)
explicit costs
input costs that require outlay of money by firm
implicit costs
input costs that do not require outlay of money by firm
economic profit
TR-(explicit+implicit costs)
accounting profit
TR-explicit costs
production function
relationship between Q inputs and Q outputs
