Chapter Two
Terms
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- Private Good
- A good that, when consumed by one individual, cannot be consumed by another individual.
- Input
- What you put into a prduction process to achieve an output
- Externality
- An effect of a desision on a third party not taken into account by the decision maker.
- Output
- A result of a prductive activtiy
- Inefficiency
- Getting less output from inputs that, if devoted to some other activity, would produce more output
- Monopoly Power
- The ability of individuals or firms currently in business to prevent other individuals or firms from entering the same kind of business.
- Laissez-Faire
- Economic policy of leaving coordination of individuals' actions to the market.
- Production Possibility Curve
- A curve measuring the maximum combination of outputs that can be obtained from a given number of inputs
- Free Rider
- Person who participates in something for free because others have paid for it.
- Merit Good or Activity
- Good or activity that governement believes is good for you, even though you may not choose to consume the good or engage in the activity.
- Comparative Advantage
- As the relative opportunity costs of producing goods(what must be given up in one good in order to get another good) differ among countries, then there are potential gains from trade, even if one country has an absolute advantage in everything.
- Macroeconomic Externality
- Externality that affects the levels of unemployment, inflation, or growth in the ecomomy as a whole.
- Outsourcing
- The relocation of production once done in the United States to foreign countries.
- Production Possibility Table
- Table that lists a choice's opportunity costs by summarizing what alternative outputs you can achieve with your inputs.
- Progressive Tax
- Tax whose rates increase as a person's income increases.
- Demerit Goods or Activities
- Goods or activities that goverment believes are bad for people even though they choose to use the goods or engage in activities.
- Government failure
- A situation in which the government intervention in the market to improve market failure actually makes the situation worse.
- Efficient
- Achieving a goal at the lowest cost in total resources without consideration as to who pays those costs.
- Principle of Increasing the Marginal Opportunity Cost
- In order to get more of something, one must give up ever increasing quantities of something else.
- Productive Efficency
- Achieving as much output as possible from a given amount of inputs or resources.
- Market Failure
- A situation in which the market does not lead to a desired result. Also: Situation in which the invisible hand pushes in such a way that individual decisions do not lead to socially desirable outcomes.
- Law of one Price
- The wages of (equal) workers in one country will not differ significantly from the wages of workers in another institutionally similar country