Chapter 7
Chapter 16
100
What are the 4 types of goods?
Public, private, club, common resources
100
What is the difference between Ordinal and Cardinal Utility and which do Economist use?
Ordinal Utility- can rank goods by preference, but can't state by how much
Cardinal Utility- Ranks goods by preference and state by how much over the last choice
Economists use Ordinal Utility
200
What problems come from Public Goods?
The Free-Rider Problem
200
What do consumers preferences have to be to represent them in a utility function?
Completeness- individuals can always rank bundles
Transitivity- eliminates cyclical preferences (A>B and B>C then A>C)
Nonsatiation (301)- more is better (people always want a little more as it makes them better off)
300
How do you solve for a negative externality?
Tax the external cost at the efficient quantity (Tax=MEC@QE)
regulate the externality
300
What is the difference of Total and Marginal Utility?
Total Utility- The overall amount of "happiness" from consumption
Marginal Utility- increase in utility from consuming an extra unit of a good
400
Why is it not efficient to produce zero pollution?
At zero nothing is being made, or the company is overpaying/taxing to clean all the pollution which is inefficient.
400
What is the law of diminishing marginal utility?
as consumption continues to increase marginal utility starts to decrease
500
How do you get the Marginal Social Cost?
Add the Private cost with the externality cost
MSC=MPC+MEC
500
How do you compare the maximization of utility?
MUx/Px=MUy/Py