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20 terms

Economics chp 5

Economics Chapter 5
STUDY
PLAY
market failure
what happens when markets don't function property. In some circumstances, economically desirable goods are not produced at all. in other situations, they are either overproduced or underproduced.
demand-side market failures
happen when demand curves do not reflect consumers' full willingness to pay for good or service
supply-side market failures
occur when supply curves do not reflect the full cost of producing a good or services
consumer surplus
as the difference between the maximum price a consumer is (or consumers are) willing to pay for a product an the actual price that they do pay
producer surplus
is the difference between the actual price a producer received (or producers received) and the minimum acceptable price that a consumer would have to pay the producer to make a particular unit of output available
efficiency losses (or deadweight Losses)
reductions of combined consumer and producer surplus-result from both underproduction and overproduction.
private goods
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rivalry
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excludability
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public goods
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nonrivalry
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nonexcludability
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free-rider problems
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cost-benefit analysis
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quasi-public goods
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externality
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coase theorem
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optimal reduction of an externality
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productive efficieny
is achievd b/c competition forces orange growers to use the best technologies and combinations of resources available. Doing so minimizes the per-unit cost of the output produced.
allocative efficiency
is achieved b/c the correct quantity of oranges- is produced relative to other goods and service