Section 14

Artificially scarce good

a good that is excludable but nonrival in consumption.

Public good

both nonexcludable and nonrival in consumption.

Tradable emissions permits

licenses to emit limited quantities of pollutants that can be bought and sold by polluters.

Marginal private benefit

the marginal benefit to the consumer.

Marginal social cost of a good

the marginal cost to society.

Gini coefficient

the most widely used measure of inequality, how disparately income is distributed across the quintiles.

Poverty rate

the percentage of the population living below the poverty threshold.

Common resource

a good that is nonexcludable but is rival in consumption.

Poverty threshold

a minimum annual income that is considered adequate to purchase the necessities of life.

Pigouivan subsidy

a payment designed to encourage activities that yield external benefits.

Overuse

an individual will continue to use it until his or her marginal private benefit is equal to his or her marginal private cost, ignoring the cost that this action inflicts on society as a whole.

External cost

an uncompensated cost that an individual or firm imposes on others.

External benefit

benefit that individuals or firms confer on others without receiving compensation.

Means-tested

benefits are available only to families or individuals whose income and/or wealth falls below some minimum.

Coase theorem

even in the presence of externalities, an economy can reach an efficient solution, provided that the legal rights of the parties are clearly defined and the costs of making a deal are sufficiently low.

Network externality

exists when the value to an individual of a good or service depends on how many other people use the same good or service.

Positive externalities

external benefits

Negative externalities

external costs

Externalities

external costs and external benefits.

Free-rider problem

if a good is nonexcludable, rational consumers won't be willing to pay for it- they will take a "free ride" on anyone who does pay.

Marginal private cost

marginal cost to the firm.

Nonrival in consumption

more than one person can consume the same unit of the good at the same time.

Negative income tax

program that supplements the earnings of low-income workers.

In-kind benefits

programs that give forms of goods and services rather than money.

Environmental standards

rules that protect the environment by specifying actions by producers and consumers.

Average cost pricing

set the price at which the demand curve intersects the average total cost curve and the firm breaks even.

Excludable

suppliers of the good can prevent people who don't pay from consuming it.

Pigouivan taxes

taxes designed to reduce external costs.

Emissions taxes

taxes that depend on the amount of pollution a firm produces.

Marginal social benefit of pollution

the additional benefit to society from an additional unit of pollution.

Marginal social cost of pollution

the additional cost imposed on society as a whole by an additional unit of pollution.

Transaction costs

the costs of making a deal.

Marginal external benefit

the difference between the marginal private benefit and the marginal social benefit of a good, that indicates the increase in external benefits to society from an additional unit of good.

Marginal external cost

the difference between the marginal private cost and the marginal social cost, and indicates the increase in external costs to society from an additional unit of the good.

Median household income

the income of a household in the exact middle of the income distribution, half of all households have lower income and half have higher income.

Marginal social benefit of a good

the marginal benefit to society.

Socially optimal quantity of pollution

the quantity of pollution that makes society as well of as possible, taking all costs and benefits into account.

Rival in consumption

the same unity of the good cannot be consumed by more than one person at the same time.

Technology spillover

the spreading of cutting-edge information among high-tech firms.

Nonexcludable

the supplier cannot prevent consumption of the good by people who do not pay for it.

Marginal cost pricing

to set price at the level at which the marginal cost curve intersects the demand curve.

Mean household income

total income of all U.S households divided by the number of households.

Private good

when a good is both excludable and rival in consumption.

Internalize the externalities

when individuals take externalities into account when making decisions.