ECON 213 Quiz 7 Study Guide
cap and trade - CORRECT ANSWER ✔✔✔ a method for managing pollution in which a limit is placed on
emissions and businesses or countries can buy and sell emissions allowances
club goods - CORRECT ANSWER ✔✔✔ goods that are excludable but not rival in consumption
Coase Theorem - CORRECT ANSWER ✔✔✔ the proposition that if private parties can bargain without
cost over the allocation of resources, they can solve the problem of externalities on their own
common resource goods - CORRECT ANSWER ✔✔✔ have two characteristics: they are rival in
consumption and nonexcludable
cost-benefit analysis - CORRECT ANSWER ✔✔✔ a study that compares the costs and benefits to society
of providing a public good
excludable good - CORRECT ANSWER ✔✔✔ a good for which it is easy to prevent consumption by
those who do not pay
external cost - CORRECT ANSWER ✔✔✔ an uncompensated cost that an individual or firm imposes on
others
Externalities - CORRECT ANSWER ✔✔✔ A side effect of an action that affects a third party other than
the buyer or seller.
free rider problem - CORRECT ANSWER ✔✔✔ For a group, the problem of people not joining because
they can benefit from the group's activities without joining.
internal costs - CORRECT ANSWER ✔✔✔ the costs of a market activity paid by an individual participant
internalize - CORRECT ANSWER ✔✔✔ to take into account the external costs to society that occur as a
result of the firm's actions.
market failure - CORRECT ANSWER ✔✔✔ a situation in which a market left on its own fails to allocate
resources efficiently
private good - CORRECT ANSWER ✔✔✔ a good or service whose consumption by one person excludes
consumption by others
private property - CORRECT ANSWER ✔✔✔ property owned by individuals or companies, not by the
government or the people as a whole
property rights - CORRECT ANSWER ✔✔✔ the ability of an individual to own and exercise control over
scarce resources
public goods - CORRECT ANSWER ✔✔✔ Goods, such as clean air and clean water, that everyone must
share.
rival good - CORRECT ANSWER ✔✔✔ a good for which consumption by one person does diminish the
quantity or quality of consumption by others
cap and trade - CORRECT ANSWER ✔✔✔ a method for managing pollution in which a limit is placed on
emissions and businesses or countries can buy and sell emissions allowances
club goods - CORRECT ANSWER ✔✔✔ goods that are excludable but not rival in consumption
Coase Theorem - CORRECT ANSWER ✔✔✔ the proposition that if private parties can bargain without
cost over the allocation of resources, they can solve the problem of externalities on their own
common resource goods - CORRECT ANSWER ✔✔✔ have two characteristics: they are rival in
consumption and nonexcludable
cost-benefit analysis - CORRECT ANSWER ✔✔✔ a study that compares the costs and benefits to society
of providing a public good
excludable good - CORRECT ANSWER ✔✔✔ a good for which it is easy to prevent consumption by
those who do not pay
external cost - CORRECT ANSWER ✔✔✔ an uncompensated cost that an individual or firm imposes on
others
Externalities - CORRECT ANSWER ✔✔✔ A side effect of an action that affects a third party other than
the buyer or seller.
free rider problem - CORRECT ANSWER ✔✔✔ For a group, the problem of people not joining because
they can benefit from the group's activities without joining.
internal costs - CORRECT ANSWER ✔✔✔ the costs of a market activity paid by an individual participant
internalize - CORRECT ANSWER ✔✔✔ to take into account the external costs to society that occur as a
result of the firm's actions.
market failure - CORRECT ANSWER ✔✔✔ a situation in which a market left on its own fails to allocate
resources efficiently
private good - CORRECT ANSWER ✔✔✔ a good or service whose consumption by one person excludes
consumption by others
private property - CORRECT ANSWER ✔✔✔ property owned by individuals or companies, not by the
government or the people as a whole
property rights - CORRECT ANSWER ✔✔✔ the ability of an individual to own and exercise control over
scarce resources
public goods - CORRECT ANSWER ✔✔✔ Goods, such as clean air and clean water, that everyone must
share.
rival good - CORRECT ANSWER ✔✔✔ a good for which consumption by one person does diminish the
quantity or quality of consumption by others
