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Micro 12.pdf
- 5. Common Property If everyone owns it, nobody owns it.
- 6. Tragedy of the Commons Resource gets wasted
- 7. Privatize the Commons Resource gets valued
- 8. Externalities External costs or external bene fi ts, that is, costs or bene fi ts, respectively, that fall on bystanders
- 9. Private Cost A cost paid by the consumer or producer
- 10. External Cost A cost paid by people other than the consumer or the producer trading in the market
- 11. Social Cost The cost to everyone: the private cost plus the external cost.
- 12. Social Surplus Consumer surplus plus producer surplus plus everyone else’s surplus
- 13. Ef fi cient Equilibrium The price and quantity that maximizes social surplus
- 14. Ef fi cient Quantity The quantity that maximizes social surplus
- 15. Pigouvian Tax A tax on a good with external costs
- 16. External Bene fi t A bene fi t received by people other than the consumers or producers trading in the market
- 17. Pigouvian Subsidy A subsidy on a good with external bene fi ts
- 18. Internalizing an Externality Adjusting incentives so that decision makers take into account all the bene fi ts and costs of their actions, private and social
- 19. Transaction Costs All the costs necessary to reach an agreement
- 20. Coase Theorem If transaction costs are low and property rights are clearly de fi ned, private bargains will ensure that the market equilibrium is ef fi cient even when there are externalities
- 21. Chapter 11 Costs and Pro fi ts Under Competition
- 23. Total Revenue = Price x Quantity TR=PQ Total Costs = Fixed Costs + Variable Costs TC = FC + VC Pro fi t = Total Revenue - Total Costs π = TR - TC
- 25. Marginal Revenue = Change in TR ÷ Change in Q MR Marginal Cost = Change in Total Cost for the next unit MC
- 26. Price Marginal Cost Marginal Revenue Market Price Quantity Qm