Econ 110 Midterm 3 Study Sheet

These flashcards cover key vocabulary and concepts from the Econ 110 Midterm 3 study sheet, focusing on market failures, externalities, economic measures, and unemployment.

Market Failure

A situation in which the allocation of goods and services is not efficient.

Screening

The process by the less-informed party to learn about the other party or side.

Signaling

The act of the more-informed party to reveal information about themselves.

Adverse Selection

A problem that occurs before a transaction where one party hides information to get a better price.

Moral Hazard

A situation occurring after a transaction where one side takes less precaution because the consequences won't fall on them.

Coase Bargaining

Negotiation between private parties to resolve externalities efficiently.

Private Goods

Goods that are both excludable and rivalrous, such as food and clothing.

Public Goods

Goods that are neither excludable nor rivalrous, like national defense.

Common Resources

Goods that are non-excludable but rivalrous, such as fish in the ocean.

Club Goods

Goods that are excludable but non-rivalrous, for example, Netflix.

Positive Externality

When the market produces less than the optimal quantity due to social benefits being larger than private benefits.

Negative Externality

When the market produces more than the optimal quantity as social costs are larger than private costs.

DWL (Deadweight Loss)

The loss of economic efficiency that can occur when equilibrium for a good or service is not achieved.

Rent-Seeking

Using resources to gain wealth through political or legal favors rather than creating value.

Natural Monopoly

A monopoly that arises due to high fixed costs and low marginal costs, making it inefficient for multiple firms to exist.

Efficiency Wages

Higher-than-market wages paid by employers to motivate workers and reduce turnover.

Money Multiplier

The ratio of the change in money supply to the change in reserves, calculated as 1 / Reserve Requirement.

CPI (Consumer Price Index)

A measure that examines the weighted average of prices of a basket of consumer goods and services.

GDP (Gross Domestic Product)

The total monetary value of all final goods and services produced within a country's borders in a specific time frame.

Real GDP

GDP adjusted for inflation, reflecting the actual volume of production.

Nominal GDP

GDP calculated at current market prices, not adjusted for inflation.

Inflation Rate

The rate at which the general level of prices for goods and services rises, eroding purchasing power.

Unemployment Rate

The percentage of the labor force that is jobless and actively seeking employment.

Labor-force Participation Rate

The ratio of the labor force to the total working-age population.