1. What are Negative Externalities? Positive Externalities? - Positive Externalities - medical research spill over.

- When there is a positive externality in consuming a good or service, too little of the good or service will be produced at market equilibrium. - Negative Externalities - pollution. - When there is a negative externality in producing a good or service, too much of the good or service will be produced at market equilibrium. 2. Define Excludability and Rivalry. - Excludability is the situation in which anyone who does not pay for a good cannot consume it. - Rivalry is the situation that occurs when one persons consuming a unit of a good means no one else can consume it. 3. Make a chart showing the characteristics of common resources, public goods, private goods, and quasi-public goods.

4. What is an Externality? - Externality is a benefit or cost that affects someone who is not directly involved in the production or consumption of a good or service. 5. What does price elasticity of demand measure? - Price elasticity of demand is a measure of the responsiveness of the quantity demanded to a change in price. 6. What is the shape of a demand curve that is perfectly inelastic? Inelastic? - The shape of a demand curve that is perfectly inelastic is a vertical line. - The shape of a demand curve that is inelastic is a slanted like (Negative Slope). 7. How do you calculate total revenue? Total Revenue = Price X Quantity 8. What disease did not decline from 1980 to 2009 in the US? Kidney Disease did not decrease from 1980 2009 in the U.S. 9. What is a single-payer health care system? What country has it? - SPHCS is a system, such as the one in Canada, in which the government provides health insurance to all of the countrys residents. - Canada has a Single-Payer Health Care System.

10. What happened to the average height of adult males in the United States? - From 1710 1970 it has gone up by 2 (57 59) - But from 1830 1920 the average height went down due to limited distribution of food. (Particularly protein and poor sanitation in cities) 11. How does better health affect a countrys economy? It lowers the mortality rate and increases the length of time a person will live. 12. What is a health maintenance organization? - Health Maintenance Organization typically reimburse doctors mainly by paying a flat fee per patient, rather than paying a fee for each individual office visit or other service provided 13. What can a government do to increase consumption of a product that creates positive externalities? - A Subsidy is what a government can use to increase consumption of a product that creates positive externalities. 14. Does the market show the private cost or market supply? Market Supply shows private costs not social costs. 15. What does a positive externality cause? - When there is a positive externality, the market may produce a quantity less than the efficient amount. 16. How much is the optimal level of pollution?

17. What is the reasoning behind marketable emissions allowance? - It gives you an incentive to pollute less. 18. What is the Coase Theorem? - The argument of economist Ronald Coase that if transactions costs are low, private bargaining will result in an efficient solution to the problem of externalities. 19. What is the relationship between incomplete property rights and market failure?

20. What is a command and control approach to reducing pollution? - Government imposing quantitative limits on the amount of pollution firms are allowed to emit or requiring firms to install specific pollution control devices. 21. Who pays for private costs? Social costs?

22. What are normal goods? Inferior goods? - Normal Good If the quantity demanded of a good increases as income increases. - Examples: Luxuries, Necessities. - Inferior Goods If the quantity demanded falls when income increases. - Examples: Ground Beef with a high fat content. 23. What is adverse selection? - The situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction. 24. What is cross price elasticity? - The percentage change in quantity demanded of one good divided by the percentage change in the price of another good. 25. What is market failure? - Market Failure is a situation in which the market fails to produce the efficient level of output. 26. What are the problems with command-and-control? The problems with command and control is that Congress orders firms to use particular methods to reduce pollution, but with Cap and Trade, a market based approach that relies on economic incentives instead of administrative rules. 27. What is elasticity? Inelasticity? - Elasticity is a measure of how much one economic variable responds to changes in another economic variable. - Inelasticity- relatively unresponsive to changes, as demand when it fails to increase in proportion to a decrease in price. 28. What is a quasi-public good? - Quasi-Public Good is a good that is easy to keep nonpayers from consuming, but use of the good by one person does not prevent use by others.