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Notes - Internalizing the externality altering incentives...

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Chapter 7 Welfare economics- how the allocation of resources effects economic wellbeing Willingness to pay- the maximum amount that a buyer will pay for a good Consumer surplus- the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it. Cost-cost for a producer to supply the product (value to seller) Producer surplus- amount item sold minus cost Efficiency- property of resource allocation; allocation of resources, efficient, inefficient Equity- how the pie is divided, how to divide resources in a Market Chapter 8 Deadweight loss- loss of total surplus caused by distortion such as tax Chapter 9 World price Tariff- tax on imported goods Country that imports- makes consumers better off, domestic producers worse off Country that export- makes consumers worse off, domestic producers better off Gains from trade exceed losses Chapter 10 Externality- uncompensated impact of one persons actions on a bystander Positive-beneficial to bystander Negative- not beneficial to bystander
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Unformatted text preview: Internalizing the externality- altering incentives for producers to take into account external effects Coase theorem- private parties can solve problems on their own Transition cost- cost (fees) to come to agreement/ bargain Corrective cost- set price, quantity follows Pollution permit- set quantity, price follows Chapter 11 Excludability- can you exclude people from using this good? Rivalry in consumption- if one persons uses the good doest it can another use the same good Private goods-yes excludable and yes rival Public goods-no rival and no excludable Common resources- goods rival consumption but not excludable Free rider- person who receives the benefit of a good but avoids paying for it Cost by benefit analysis- study that compares cost to benefit to society of providing a public good Tragedy of the commons- parable that illustrates why common resources get used more than is desirable from the standpoint of society as a whole...
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