Econ#3 def quiz

Common pool resources

A resource that is a hybrid between a public and private good (not owned by anyone) that are rivalrous because they are scarce, having a finite supply. They are non-excludable, have no price and available for everyone to use without payment or any other restrictions. Examples include lakes, forests, and fisheries.

2. Unsustainable production

refers to production that uses resources unsustainably, depleting or degrading them. This pattern has been one of the greatest challenges over the past few years. They are the main drivers of triple planetary crises of climate change, biodiversity loss and pollution, threatening human lives, environment and targets of SDGs.

3. Marginal private costs (MPC)

refer to the change in the producers total cost brought about by the production of an additional unit of a good or service.

4. Marginal social benefits (MSB)

is the additional benefit to society from consuming one more unit of a good or service, incorporating both the private benefit received by consumers and any external benefits that may accrue to others.

5. Collective self-governance

occurs when the stakeholders in a community work together to combat the negative externalities of production usually associated with common pool resources.

6. Positive production externalities

is related to external benefits created by producers. This occurs when a third party benefits from the production of a good. For example, building a train station may provide shelter for the homeless when it is raining. If a company develops new technology, such as a database programme, this new technology can be implemented by other firms who will gain a similar boost to productivity.

7. Non-rivalrous goods

are public goods that are consumed by people but whose supply is not affected by peoples consumption. In other words, when an individual or a group of individuals use a particular good, the supply left for other people to use remains unchanged. Examples are traffic light, highways and tolls.

8. Social optimum output

is when marginal social costs (MSC) are equal to the marginal social benefits (MSB). This means that the last unit produced adds equal to society's costs and benefits. The market output, when not at MSC=MSB, will lead to either overproduction or underproduction of a particular good.

9. Carbon tax

is the tax per unit of carbon emissions of fossil fuel. The term can also refer to taxing other types of greenhouse gas emissions, such as methane.

10. Tradable permits

also known as cap-and-trade schemes are quotas for pollution that can be exchanged to create a market in the right to pollute, and thereby create a tax on polluting. The emission of pollution requires the purchase of permits to pollute, and the price of these permits represents a tax on pollution.

11. Demerit goods

are goods or services whose consumption is considered harmful to the consumer themselves. They include tobacco, alcohol, and gambling products, which can lead to addiction and health problems. In addition, demerit goods can also cause pollution and other environmental damage.

12. Negative consumption externalities

it is the consumption of a good reduces the well-being of others (third party) who are not compensated for this harm. Cigarette smoking is a common example, in which one's consumption affects others because of the health hazards of second hand (passive) smoke.

13. Merit goods

those are goods or services that are beneficial to individuals and society as a whole but are often under-consumed in a free market economy. These goods have positive effects on health, education, or the environment, but individuals may not consume them in optimal quantities.

14. Free rider problem

This occurs when people can benefit from a good/service without paying anything towards it. This concept of a market failure occurs when people are benefiting from resources that they do not pay for. If there are too many free riders, the resources, goods, or services may be overprovided. Therefore, this would create a free rider problem. The problem is commonly seen with public goods (goods with non-excludable benefits).

15. Socially optimum output

best situation from the point of view of allocative efficiency Qopt.

16. Pigouvian tax

indirect tax on the firm per unit of output produced

17. Contracting out

government makes an agreement with a private firm to carry out an activity that the government was previously doing itself.

18. Regressive tax

indirect tax where lower income people have to pay a higher proportion of their income in tax than higher income people, which is considered inequitable.

19. Governments legislation and regulation

approach where government uses its authority to enact legislation and regulations in the public's interest.

20. Education and awareness creation

Education of the public and provision of information regarding activities of firms