Test 2 Chap 8,12,14 Flashcards Preview

Econ 403 Public Policy > Test 2 Chap 8,12,14 > Flashcards

Flashcards in Test 2 Chap 8,12,14 Deck (6)
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1
Q

An equation stating that social welfare depends on some function of the individual utilities of the people in the society

A

The utilitarian Social welfare function

2
Q

Additive social welfare function

A

Defines social welfare as the sum of all the individuals utilities. The assumptions are: Individuals have the same utility functions, the utility functions are based on diminishing marginal utility of income, total income is fixed

3
Q

States that the social welfare in a society depends on the utility of the individual who has the lowest utility in the society

A

The Maximin Criterion

4
Q

The return to owners of a firm above the opportunity costs of all the factors used in production.

A

Economic profits

5
Q

The Hicks-Kaldor Criterion

A

A project should be undertaken if it has a positive net value regardless of the distributional consequences

6
Q

Consumer surplus

A

The area under the demand curve but above a horizontal line at market price