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| In a price system, a buyer can____ _____ ___ _____ |
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| where the market economy leads to too few or too many resources going to a specific economy activity |
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result of an economic activity that spills over into a third party.
ex: pollution |
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| those who are not directly involved in an activity or transaction |
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| rights of an owner to use and sell |
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| when there are external costs, the market will tend to ____ ____ |
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| underallocating resources |
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| how the government can correct negative externalities |
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1. special taxes and legislative regulation
2. prohibition |
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charge to a polluter that allows him to put pollution in the air
ex: also called a pollution tax; a type of special tax to deal with negative externalities |
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| how the goverment can correct positive externalities |
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1. financing the production
2. subsidies
3. regulation |
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| examples of positive externalities |
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Definition
| ex: gardens, highways, education |
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| examples of negative ecternalities |
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| ex: pollution, congested highways, hazardous waste |
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| 4 economic functions of the goverment |
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1. providing a legal system
2. promoting competition
3. providing public goods
4. ensuring economy wide stability |
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| law that restricts the forming of monopolies |
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| a firm that determines the market price of a good |
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goods that can be used by only one person at a time
ex: dvd players, cars |
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| principle of rival consumption |
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competition to use the private good
ex: competing for the channel box |
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goods that can be used jointly and many people
ex: public pool, library |
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| 2 characteristic of public goods |
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Definition
1. public goods can be used by many people; no additional opprontunity cost
2. it is hard to make a collection system for a public system for a public good on the basis of how much others use it |
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Term
| true public goods must be provided by_____ _______ |
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| when people presume that others will pay for public goods so they dont have to pay |
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good that is deemed socially desirable thoguht the political process
ex: stadiums, mesuems, plays, concerts |
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good deemed undesirale though the policial process
ex: cocain, herione, weed |
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payments made to individuals for which no services or goods are rendered in return
ex: social security and disability benefits |
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payments that are in form of goods and services
ex: food stamps, public housing, medical care |
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| collective decision making |
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| how voters, politicians and other parties act and how these actions influence nonmarket decisions |
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| study of collective decision making |
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| system of rewards and punishments for each person |
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| goverment or political goods |
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| goods provided by public sector |
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| if you dont pay your taxes, your bank account and other things can be seized by uncle sam! |
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| collective decision making where 50 percent of vote wins |
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| some votes from people count more than other votes |
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