PHASE 2 - HW5 Flashcards Preview

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Flashcards in PHASE 2 - HW5 Deck (34):
1

market failures occur when

competitive market system under or over allocates resources to production of goods

2

consumer surplus is the

difference between maximum prices consumers are willing to pay for a product and lower equilibrium price

3

in order for market to achieve allocative efficiency, need

cosumers' maximum willingness to pay equal producers' minimum acceptable price, sum of producer and consumer suplus to be maximized, marginal benefit of last unit produced equals marginal cost of producing that unit

4

allocative efficiency occurs only at output where

combined amounts of consumer surplus and producer surplus are maximized

5

efficiency loss (aka deadweight loss) is measured

as combined loss of consumer and producer surplus

6

private goods characterized by

rivalry and excludability

7

bc of free riders, demand for public good

does not get expressed in market, good does not get produced by private sellers

8

external cost of an actiivty is one that is

borne by those not directly involved

9

positive externality

some fraction of the benefit of an activity is recieved by ppl not participating in activity

10

negative externatliy

part of cost of activity falls on ppl no pursuing activity

11

exisitence of negative externatily will result in

greater than socially optimal level of production

12

if a good generating negative externatlites were priced to account for spillover costs, then its price would _ and and outputs would ___

increase, decrease

13

external benefit implies that price of good is _ and external cost implies that price is _ relative to social optimum

too low, too low

14

external benefit of an actiivty is addeed to private benefits, then the ____

demand curve shifts right

15

coase theorm

individuals can solve many externalities if they buy and sell the right to generate externality

16

factors in coase theorm

parties are self interested, potential gain in surplus is high, property rights have already been assigned to one of parties

17

market failures arise when

d/s dont accuractly reflect all benefits and all costs of production

18

consumer surplus graphically

under demand curve, above actual price

19

producer's minimum acceptable price for a particular unit of a good

equals the marginal cost of producing that particular unit

20

factors that don't necessairily garuntee social optimality

everyone can afford basic necesisties of life, market in equilibrium, collective action has allocated goods

21

allocative efficiency means that

resources are being devoted to procution of g/s most desired by society

22

excludability means that

sellers can restrict benefits of a good to those who pay for it

23

in the case of ____, the market fails to generate the efficient outcome because buyers/ sellers only take their self interests into account

external cost/external benefit

24

emission fee levied against polluters will tend to

internalize the external cost of pllution

25

significant spillover costs to society production suggests that

resources are overallocated to industry

26

when dealing with externalities, government can

correct market failure in both positive and negative externalities by inducing market participants to interliaze the externalitiy

27

market for pollution rights can be expected to

provide potential polluters with monetary incentive to find ways to reduce emissions

28

after correcting externality, equilibrium price and qty both rise. the externality was ___

postiive externality

29

requiring car producers to install emission control devices on cars, gov forces producers to internalize some f the external costs of auto pollution. leads to equilibrium price of cars ___ and qty ___

increasing, decreasing

30

amrket equilibrium qty is less than socially optimal qty, one infers that

production of good has positive externality

31

if the external cost of an activity is added to private costs, then the ______which curve shifts where____

supply curve shifts left

32

air polution policy of US has historically ben one of

direct controls in form of uniform emission standarsd

33

suppose coal mining produces a negative externality in form of polluted streams. one can deduce that unregulated

qty of coal produced is too high

34

amrginal cost of reducing pollution is positive

TBD!!!!!!!!!!!!!!!!