Chapter 4&5 and 6

A commodity that is nonrival and nonexcludable in consumption.

A commodity that is rival and excludable in consumption.

A good that is rival and/or excludable to some extent.

Rival and excludable commodities that are provided by governments.

The process of creating a market demand curve by summing by quantities demanded by each individual at every price.

The process of creating an aggregate demand curve for public good by adding the prices each individual is willing to pay for a given quantity of the good.

The incentive to let other people pay to a public good while you enjoy the benefits.

When a producer charges each person the maximum he or she is willing to pay for a good.

The process of turning services that are supplied by government over to the private sector for provision and/or production.

The idea that some commodities ought to be made available to everybody.

Provided that transaction are negligible, an efficient solution to an externality problem is achieved as long as someone is assigned property rights, independent of who is assigned those rights.

A tax levied on each unit of an externality-generator’s output in an amount equal to the marginal damage at the efficient level of output.

A tax levied on each unit of pollution

A policy that achieves a given outcome at the lowest cost possible.

A tax levied on driving equal to the marginal congestion costs imposed on other drivers

A policy of granting permits to pollute. The number of permits is set at the desired pollution level, and polluters may trade the permits.

Within a cap-and-trade system, a price set by government at which polluters can purchase additional permits beyond the cap.

Policies that provide polluters with financial incentives to reduce pollution.

Policies that require a given amount of pollution reduction with limited or no flexibility with respect to how it may be achieved.

A type of commanded-and-control regulation that requires firms to use a particular technology to reduce their pollution.

A command-and-control regulation that sets an emissions goal for each individual polluter and allows some flexibility in meeting the goal.

Areas with relatively high concentrations of emissions.

The field that applies economic principles to the analysis of political decision making.

The tax share an individual must pay per unit of public good.

One more than half of the voters must favor a measure for it to be approved.

With majority voting, community preferences can be inconsistent even though each individual’s preferences are consistent.

The process of organizing the order in which votes are taken to ensure a favorable outcome.

When a majority voting on more than two possibilities goes on indefinitely without a conclusion ever being reached.

A point on the graph of an individual’s preferences at which all the neighboring points have lower utilities

Utility consistently falls as a voter moves away from his or her most preferred outcome.

If, as voter moves away from his or her most preferred outcome, utility goes down, but then again goes up back up again.

The voter whose preferences lie in the middle of all voters’ preferences; half the voters want more of the item selected and half wants less.

As long as all preferences are single peaked and several other conditions are satisfied, the outcome of majority voting reflects the preferences of the median.

The trading of votes to obtain passage of a package of legislative proposals.

Society’s ranking of two different projects depends only on individuals’ ranking of the two projects, not on how individuals rank the two projects relative to other alternatives.

Using the government to obtain higher than normal returns

An arrangement under which suppliers band together to restrict output and raise price.

The pure waste created when the marginal benefit of a commodity differs from its marginal cost