Econ 1000 Final Exam
A forum where buyers and sellers conduct transactions Answer - Market
the idea that in the market system, consumers ultimately decide which goods and
services firms will produce Answer - Consumer sovereignty
A market where there is only one seller, and there is no close substitute for the product
being sold Answer - Monoply
A market with many sellers who are all selling an identical product Answer - Perfect
competition
a market with many sellers offering differentiated products Answer - monopolistic
competition
A market dominated by few large sellers offering identical or differentiated products
Answer - Oligopoly
Four functions of prices in the market system Answer - Measuring desire
Reflecting scarcity
Means of communication
Coordinating production decisions
An increase in the total value of the goods and services an economy produces each
year Answer - Economic growth
the ground rules, customs, and conventions that govern the behavior of market
participants Answer - Institutions
4 Institutions/ground rules Answer - Competition
Honesty
Information
Property Rights
A market condition in which buyers and sellers are free to choose with whom to
complete their transactions with Answer - Competition
A form of economic and social organization in which all property is held in common and
the government decided what to produce and how to distribute it Answer -
Communism
A form of economic organization in which productive resources are privately owned by
individuals, who independently decide what to produce Answer - Capitalism
,A form of economic organization in which individuals may own private property but in
which the government owns and operates productive resources Answer - Socialism
The right to own or control a resource Answer - Property right
An exclusive property right the goverment gives an inventor to produce and/or market
an invention, typically lasts for about 20 years Answer - Patent
An exclusive property right the government grants the creator of an original work to
produce and sell that work, typically lasts the life of the creator plus 70 years Answer -
Copyright
A by-product of an activity that hurts or helps someone who is not involved in the activity
Answer - Externality
imposes a burden or cost on others
examples: types of pollution such as noise, water, and air Answer - Negative
externality
Confers benefits on others Answer - Positive externality
A theorem which asserts that under certain conditions the property right to an activity
will be acquired by the party that values it most. Answer - Coase theorem
the costs of arranging and enforcing a transition Answer - Transaction costs
Four Major types of Transactions Costs Answer - Search costs, collectivization cost,
negotiation costs, and monitoring and enforcement costs
Can impede the bargaining that private individuals might do to resolve environmental
disputes, if any of these costs are sufficiently high, bargaining may not be an effective
means of resolving environmental disputes Answer - Transaction costs
costs of determining who to bargain with, these can add up so quickly, that by the time it
is figured out, the searcher will have no money left to bargain with Answer - Search
costs
the costs of motivating and organizing a large group of people, are likely to impede the
bargaining that leads to an ideal social outcome Answer - Collectivization costs
costs associated with the process of hashing out the terms of an agreement (ex.
Lawyer, hiring accountants and professional negotiators) Answer - Negotiation costs
the costs of ensuring that the parties live up to the promises they made in bargaining
Answer - Monitoring and enforcement costs
, 4 basic principles Answer - policymakers should consider these principles when
designing pollution regulations
Principle 1 Answer - -Regulation is necessary only when transaction costs preclude
bargaining between polluter and victim
-If transactions are low, parties can work out environmental disputes without the help of
regulators
Principle 2 Answer - -The regulation should achieve the outcome the affected parties
would have reached had transaction costs not been so high
-When transacation costs are high, regulators should strive to achieve the outcome that
parties would have bargained on their own
Principle 3 Answer - -The regulation should be designed to make the polluter
internalize the cost of the externality
-Whatever form regulation takes, it will be effective only if it makes the polluter
internalize the cost that his pollution imposes on others
costs that are borne by the producer of a good or service Answer - Private costs
the value of a negative externality borne by those who do not produce the good or
service Answer - External costs
The full costs of producing a good or service, including the producer's private costs and
all the external costs Answer - Social cost
Principle 4 Answer - -Eliminating pollution entirely should not be the goal of regulation
-The goal of regulation should not be to eliminate pollution but to achieve the level of
pollution that maximizes society's well-being
Tools governments use to regulate pollution Answer - -To reduce pollution, regulators
must design policies that encourage polluters to act in socially desireable ways
Taxes, Subsidies, Cap-and-Trade systems
Taxes Answer - -Gov. can impose a tax on activity that causes pollution
-Ideal tax=cost of damage caused
-Setting a tax too low or too high will lead to a smaller economic pie
Subsidies Answer - -Encourages cleaner production by subsidizing pollution controls
-Amounts to a tax in reverse, government taxes the public to be able to give out
subsidies
-A government program that can pay for itself and in the process makes our lives richer
rather than poorer
A forum where buyers and sellers conduct transactions Answer - Market
the idea that in the market system, consumers ultimately decide which goods and
services firms will produce Answer - Consumer sovereignty
A market where there is only one seller, and there is no close substitute for the product
being sold Answer - Monoply
A market with many sellers who are all selling an identical product Answer - Perfect
competition
a market with many sellers offering differentiated products Answer - monopolistic
competition
A market dominated by few large sellers offering identical or differentiated products
Answer - Oligopoly
Four functions of prices in the market system Answer - Measuring desire
Reflecting scarcity
Means of communication
Coordinating production decisions
An increase in the total value of the goods and services an economy produces each
year Answer - Economic growth
the ground rules, customs, and conventions that govern the behavior of market
participants Answer - Institutions
4 Institutions/ground rules Answer - Competition
Honesty
Information
Property Rights
A market condition in which buyers and sellers are free to choose with whom to
complete their transactions with Answer - Competition
A form of economic and social organization in which all property is held in common and
the government decided what to produce and how to distribute it Answer -
Communism
A form of economic organization in which productive resources are privately owned by
individuals, who independently decide what to produce Answer - Capitalism
,A form of economic organization in which individuals may own private property but in
which the government owns and operates productive resources Answer - Socialism
The right to own or control a resource Answer - Property right
An exclusive property right the goverment gives an inventor to produce and/or market
an invention, typically lasts for about 20 years Answer - Patent
An exclusive property right the government grants the creator of an original work to
produce and sell that work, typically lasts the life of the creator plus 70 years Answer -
Copyright
A by-product of an activity that hurts or helps someone who is not involved in the activity
Answer - Externality
imposes a burden or cost on others
examples: types of pollution such as noise, water, and air Answer - Negative
externality
Confers benefits on others Answer - Positive externality
A theorem which asserts that under certain conditions the property right to an activity
will be acquired by the party that values it most. Answer - Coase theorem
the costs of arranging and enforcing a transition Answer - Transaction costs
Four Major types of Transactions Costs Answer - Search costs, collectivization cost,
negotiation costs, and monitoring and enforcement costs
Can impede the bargaining that private individuals might do to resolve environmental
disputes, if any of these costs are sufficiently high, bargaining may not be an effective
means of resolving environmental disputes Answer - Transaction costs
costs of determining who to bargain with, these can add up so quickly, that by the time it
is figured out, the searcher will have no money left to bargain with Answer - Search
costs
the costs of motivating and organizing a large group of people, are likely to impede the
bargaining that leads to an ideal social outcome Answer - Collectivization costs
costs associated with the process of hashing out the terms of an agreement (ex.
Lawyer, hiring accountants and professional negotiators) Answer - Negotiation costs
the costs of ensuring that the parties live up to the promises they made in bargaining
Answer - Monitoring and enforcement costs
, 4 basic principles Answer - policymakers should consider these principles when
designing pollution regulations
Principle 1 Answer - -Regulation is necessary only when transaction costs preclude
bargaining between polluter and victim
-If transactions are low, parties can work out environmental disputes without the help of
regulators
Principle 2 Answer - -The regulation should achieve the outcome the affected parties
would have reached had transaction costs not been so high
-When transacation costs are high, regulators should strive to achieve the outcome that
parties would have bargained on their own
Principle 3 Answer - -The regulation should be designed to make the polluter
internalize the cost of the externality
-Whatever form regulation takes, it will be effective only if it makes the polluter
internalize the cost that his pollution imposes on others
costs that are borne by the producer of a good or service Answer - Private costs
the value of a negative externality borne by those who do not produce the good or
service Answer - External costs
The full costs of producing a good or service, including the producer's private costs and
all the external costs Answer - Social cost
Principle 4 Answer - -Eliminating pollution entirely should not be the goal of regulation
-The goal of regulation should not be to eliminate pollution but to achieve the level of
pollution that maximizes society's well-being
Tools governments use to regulate pollution Answer - -To reduce pollution, regulators
must design policies that encourage polluters to act in socially desireable ways
Taxes, Subsidies, Cap-and-Trade systems
Taxes Answer - -Gov. can impose a tax on activity that causes pollution
-Ideal tax=cost of damage caused
-Setting a tax too low or too high will lead to a smaller economic pie
Subsidies Answer - -Encourages cleaner production by subsidizing pollution controls
-Amounts to a tax in reverse, government taxes the public to be able to give out
subsidies
-A government program that can pay for itself and in the process makes our lives richer
rather than poorer
