Trade and Government
Revenue and Protective
Types of Tariffs
A benefit obtained without compensation by third parties from the production or consumption of sellers or buyers.
Positive Externality
A type of economic structure with one producer
Monopoly
Factors that prevent firms from entering the industry
Barriers to Entry
Land, Labor, Capital, and Entrepreneurial Ability
4 categories of economic resources
A tariff designed to shield domestic producers of a good or service from the competition of foreign producers
Protective tariff
A cost or benefit accruing to a third party external to the market transaction.
Externality
A type of economic structure with few large producers
Oligopoly
Measures the responsiveness of purchases of one good to a change in the price of another good
Cross Elasticity of Demand
Demand that is Insensitive to price changes
Inelastic demand
All barriers other than protective tariffs that Page G-16 nations erect to impede international trade, including import quotas, licensing requirements, unreasonable product-quality standards, unnecessary bureaucratic detail in customs procedures, and so on.
Nontariff barriers (NTBs)
This creates positive externalities, and too little is produced
Demand-side market failure
A seller (or buyer) who is unable to affect the price at which a product or resource sells by changing the amount it sells (or buys).
Price taker
Underallocations of resources occur when the private demand curve understates consumers’ full willingness to pay for a good or service.
Market Failure
The inability to keep nonpayers (free riders) from obtaining benefits from a certain good; a characteristic of a public good.
Nonexcludability
Inefficiencies in resource allocation are caused by problems in the operation of the public sector (government). Specific examples include the principal-agent problem, the special-interest effect, the collective-action problem, rent seeking, and political corruption.
Government failure
This theorem states that Private sector bargaining can solve the externality problem.
Coase theorem
An oligopoly in which firms produce a standardized product.
Homogeneous Oligopoly
The part of economics involving value judgments about what the economy should be like; focused on which economic goals and policies should be implemented; policy economics.
normative economics
The selling of a product to different buyers at different prices when the price differences are not justified by differences in cost
Price discrimination
Under this economy, the government is needed to: Protect private property from theft, provide a legal environment for contract enforcement
Laissez-Faire Capitalism
A tax is an amount to offset the negative externalities
Pigovian tax
The theory of why most oligopolies fail
Prisoner’s Dilemma
When the price is equal to the marginal cost.
Socially Optimal Price
The possibility that households trying to protect themselves against a recession by saving more may inadvertently worsen the recession and hurt themselves by reducing overall consumption and economic activity
Paradox of thrift