Ch.4 | micro approach to political & economic markets in theory & practice Flashcards Preview

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Flashcards in Ch.4 | micro approach to political & economic markets in theory & practice Deck (23)
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1
Q

asymmetric information

A

A situation in which one party involved in an exchange knows more about the commodity being exchanged than the other parties do

2
Q

discount rate

A

The degree to which we allow the future to influence our current choices; a higher rate means that we place less value on the future than we do on the present

3
Q

externality

A

The effect of a transaction on a third party that is not directly involved in the exchange

4
Q

free riding

A

A collective action problem in which individuals have no incentive to contribute to the provision of a public good, since they cannot be excluded from consuming that good even if they fail to contribute

5
Q

incomplete information

A

A situation in which parties to an exchange or interaction are not fully informed about the resources and preferences of those engaged in the interaction

6
Q

median voter

A

The voter who is located exactly in the middle of all the voters arrayed on a political spectrum

7
Q

monopoly

A

A market condition in which a single producer is able to manipulate the price of a commodity by affecting the supply of that commodity in a market

8
Q

monopsony (monopsonists)

A

A market condition in which a single buyer is able to manipulate the price of a commodity by affecting the demand for that commodity in a market

9
Q

oligopoly

A

A market condition in which the actions of a few sellers will materially affect price and have a measurable impact on competitors and consumers

10
Q

oligoponists

A

A cartel of buyers that manipulates price and has a measurable impact on competitors and consumers

11
Q

Pareto optimal

A

A situation or equilibrium wherein another distribution of resources and efforts cannot benefit one member of society without hurting another and lowering the overall efficiency of the production and consumption of goods, given the mix of prefer­ences in society

11
Q

market failure

A

A situation in which market exchange fails to allocate societal resources as efficiently as theoretically possible, so that a society produces and consumes less than the optimal levels of goods and services

12
Q

plurality rule

A

A voting model in which the candidate, policy, or referendum with the most votes wins the election—a winner-take-all system

13
Q

pooling equilibrium

A

A dilemma caused by incomplete or asymmetric information whereby consumers face difficulties distinguishing among types—good sellers or good products from bad sellers or bad products;

(contrast: see separating equilibrium)

14
Q

price takers

A

All participants in economic exchange whose actions cannot individually control or manipulate prices; in efficient and competitive markets, all parties to an exchange are price takers and must accept the prices determined by the invisible hand of the price mechanism

15
Q

prisoner’s dilemma

A

A particular form of a social trap that requires the actors to cooperate and to resist playing their dominant strategies in order to achieve a better collective outcome, although the structure of the interaction pushes each player toward her dominant strategy of noncooperation

16
Q

property rights

A

Rules defining the ownership of property

17
Q

separating equilibrium

A

The ability to distinguish among types; a solution to the dilemma created by a pooling equilibrium, in which consumers cannot distinguish good sellers or good products from bad sellers or bad products;

(contrast: see pooling equilibrium)

18
Q

shadow of the future

A

A concept indicating how much we value the future as compared to the present and how the future affects our present choices;

(contrast: see discount rate)

19
Q

social choice theory

A

A body of inquiry that studies aggregation mechanisms in search of voting rules that accurately aggregate the preferences of society’s members

20
Q

transaction costs

A

The costs of negotiating, monitoring, and enforcing the terms of an exchange or a contract

21
Q

uncertainty

A

A situation in which decision makers have incomplete information about their world, their possible choices, the preferences and possible choices of others, and how multiple decision makers’ choices will interact

22
Q

voting rules

A

A mechanism that defines the process by which societies decide upon the political commodities they will consume; a wide variety of voting rules are employed around the world