Unit 5 Flashcards
(55 cards)
A(n) ___ is a contract that permits its owner to buy a specified quantity of stocks of a corporation at a future date, but at the price specified in the contract rather than the stock’s market price at the date of purchase.
Stock option
___ are people hired to run a complex enterprise on behalf of the ___, those whose benefit the enterprise is supposed to serve.
Agents; principals
___ refers to the tendency of insurance to discourage policyholders from protecting themselves from risk.
Moral hazard
___ refers to unproductive activity in the pursuit of economic profit - in other words, undeserved profit in excess of competitive earnings.
Rent seeking
A commodity is ___ if someone who does not pay for it can be kept from enjoying it.
Excludable
A commodity is ___ if it is used up when someone consumes it.
Depletable
A(n) ___ is a commodity characterized by both depletability and excludability.
Private good
A(n) ___ is a commodity or service whose benefits are not depleted by an additional user and from which it is generally difficult or impossible to exclude people, even if the people are unwilling to pay for the benefits.
Public good
The ___ is the share of an activity’s marginal benefit that is received by the persons who carry out the activity.
Marginal Private Benefit (MPB)
The ___ of the personal services is the tendency of the costs and prices of these services to rise persistently faster than those of the average output in the economy.
cost disease
The ___ of an activity is the sum of its marginal private benefit plus its incidental benefits (positive or negative) that are received by others, and for which those others do not pay.
Marginal Social Benefit (MSB)
The ___ is the share of an activity’s marginal cost that is paid for by the persons who carry out the activity.
Marginal Private Cost (MPC)
The ___ is a curve that shows the maximum quantities of outputs it is possible to produce with the available resource quantities and the current state of technological knowledge.
Production possibilities frontier
___ are government rules that tell organizations or individuals what processes or raw materials they may use or what products they are permitted to supply or purchase.
Direct controls
___ are taxes that polluters are required to pay. The amount they pay depends on what they emit and in what quantities.
Pollution charges (taxes on emissions)
___ are licenses issued by government specifying the maximum amount the license holder is allowed to emit. The licenses are restricted to permit a limited amount of emissions in total. Often, they must be purchased from the government or an a special market.
Emissions permits
___ occurs when the economic reactions to a tax cause prices and outputs in the economy to change, thereby shifting part of the burden of the tax onto others.
Tax shifting
The ___ is an allocation of the burden of the tax to specific individuals or groups.
Incidence of a tax
The ___ of a tax to an individual is the amount by which the burden of the tax exceeds the tax that is paid.
Excess burden
The ___ to an individual is the amount one would have to be given to be just as well off with the tax as without it.
Burden of a tax
The ___ holds that people who derive benefits from a service should pay the taxes that finance it.
Benefits Principle of Taxation
The ___ of taxation refers to the idea that people with greater ability to pay taxes should pay higher taxes.
Ability-to-pay Principle
___ refers to the notion that differently situated individuals should be taxed differently in a way that society deems to be fair.
Vertical equity
___ is the notion that equally situated individuals should be taxed equally.
Horizontal equity
