Econ tes 3

Why is there almost no international trade in medical services, and no international trade in houses?

Their trade costs are prohibitively expensive, and it is nearly impossible to transport a house.

In the presence of externalities, market forces ignore the interests of _____, resulting in _____.

bystanders; an inefficient outcome for society

The Coase Theorem states that externality problems can be solved by private bargaining if it is _____ and can _____.

costless; be legally enforced

The World Trade Organization (WTO) provides a way for all its member nations to:

jointly agree to reduce or eliminate trade barriers.

When _____ are involved in bargaining, finding a solution that removes externalities is more difficult.

more parties

Any solution to the externality problem involves getting _____ to consider _____ effects.

participants; external

An example of a rival good would be:

tickets to a concert.

A solution to the free-rider problem is the government's power to _____, which is something businesses and individuals _____ have the power to do.

force people to pay for the goods they benefit from; do not

Yahoo! banned working from home in 2013, based on the observation that informal hallway conversation often leads to _____ externalities because it helps _____.

positive; increase collaboration and create new ideas

A counterargument for _____ is that sometimes trade limitations actually undermine this. For example, limiting exports of encryption software actually helped foreign competitors develop encryption technology, by reducing the competition from superior U.S. products.

protecting national security