Chapter 1
This is the next best alternative when making a decision.
What is Opportunity Cost.
A societal arrangement, either compelled or voluntary, that governs human behavior.
What is an institution?
The economic principle which states that as the price of a good falls the quantity demanded will increase.
What is the Law of Demand?
When a third party receives a cost or benefit felt by an independent transaction.
What is an externality?
This occurs when voters as a collective display an illogical preference.
What is the paradox of voting?
Review the following: Inflation is currently at 3.5%. This is the type of economic statement.
What is a positive statement?
The institution that entails that you are entitled to the consequences of your actions, and therefore the product of your production.
What is private property?
This is a type of good that when the price of a related good falls, the demand for this good rises.
What is a complementary good?
When there exists within the market an asymmetry of information between the buyer and the seller, this concept is the inevitable result.
What is adverse selection?
What is an inefficient no vote?
Believing that all humans act in a rational way and think on the margins (subconsciously or consciously looking at marginal benefit and marginal cost).
This is an inherent problem within centralized economic systems wherein central planners have no way of determining what should be produced to maximize individual utility.
What is the incentive problem?
If taxes on the production of a particular good is reduced, this will happen to the price.
What is decline?
This method of combatting externalities includes the enforcement of private property rights to enable individuals to sue for redress.
What is the Coase Theorem?
This is when an individual, entity, or organization seeks additional surplus by harming another individual, entity, or organization.
The recognition that all humans have unlimited wants but limited resources.
What is the economizing problem?
The diagram showing that households sell resources (land, labor, and capital) to firms for income and that firms produce goods and sell it back to the households for a price.
What is the circular flow?
The government sets a maximum price for the renting of apartment buildings in a city that is lower than the market price. This is the result.
What is a shortage?
What is a public good?
Attorneys in practice having the authority to write the criteria for being admitted to the BAR is an example of this.
What is regulatory capture?
This shows the available combination of goods that can be produced based on the supply of available land, labor, and capital for a society.
What is the Production Possibilities Frontier
This is the concept that private self-interest will inevitably promote the societal well-being.
What is the invisible hand?
This concept explains why the demand curve within economics is downward sloping.
What is diminishing marginal utility?
As it relates to public and private goods, this is how we define healthcare.
What is a private good?
This is an alternative form of voting in which individuals can buy votes that cost the square of the number (i.e. 2 votes would cost $4 dollars, 3 votes would cost $9, and 4 votes would cost $16).
What is Quadratic voting?