ECO320 Review Questions and Verified Answers/Accurate Solutions| Already Graded A+
What are the three characteristics of private goods? - Rivalry in consumption
- Consumed by individuals
- Not enjoyed equally
(E.g. cars, clothing)
What are the three characteristics of public goods? - No rivalry
- Enjoyed by all
- Costly to exclude people from enjoying them
(E.g. fresh air, national defense)
What are private bads? Issues between individuals resolved through private agreements
(e.g. car accident)
What are public bads? Issues that involve negative externalities (e.g murder is private but
resulting fear is a public bad)
Who do criminals behave like? Business people
What are the four sources of law? - Customs
- Common law (judges)
- Legislation (Ottawa)
- Executive decision making (UofT)
What is the central problem in the eco analysis of law? Optimality - how to maximize social
surplus
What two things does equilibrium represent? - Maximum amount of happy people
, - No shortages / surplus
What are the two characteristics of short term supply curves? - Firms have not yet entered
or exited the market
- Existing firms have not expanded production
What is consumer vs supplier surplus? - Consumer: price lower than WTP
- Supplier: price higher than WTS
What was the Law of Primogeniture in England? Eldest son inherited entire estate
Preserved economies of scale but did not maximize utility
What three things happened when a rent ceiling is imposed? - Not enough apartments
- Price will go back up
- Deadweight loss
What are two reasons for which it is not always best to only focus on maximizing efficiency?
- Efficiency and profits go hand in hand but sometimes maximizing them leads to
inefficiency
- Other factors important as well (e.g. income and endowment effects)
What is an income effect? An increase in ones income changes their demand
What is an endowment effect? Assigning a higher value to an item you already own
What are the four reasons for which Cooter does not believe private law is the solution to
redistribution? - High transaction costs
- Imprecise targeting
What are the three characteristics of private goods? - Rivalry in consumption
- Consumed by individuals
- Not enjoyed equally
(E.g. cars, clothing)
What are the three characteristics of public goods? - No rivalry
- Enjoyed by all
- Costly to exclude people from enjoying them
(E.g. fresh air, national defense)
What are private bads? Issues between individuals resolved through private agreements
(e.g. car accident)
What are public bads? Issues that involve negative externalities (e.g murder is private but
resulting fear is a public bad)
Who do criminals behave like? Business people
What are the four sources of law? - Customs
- Common law (judges)
- Legislation (Ottawa)
- Executive decision making (UofT)
What is the central problem in the eco analysis of law? Optimality - how to maximize social
surplus
What two things does equilibrium represent? - Maximum amount of happy people
, - No shortages / surplus
What are the two characteristics of short term supply curves? - Firms have not yet entered
or exited the market
- Existing firms have not expanded production
What is consumer vs supplier surplus? - Consumer: price lower than WTP
- Supplier: price higher than WTS
What was the Law of Primogeniture in England? Eldest son inherited entire estate
Preserved economies of scale but did not maximize utility
What three things happened when a rent ceiling is imposed? - Not enough apartments
- Price will go back up
- Deadweight loss
What are two reasons for which it is not always best to only focus on maximizing efficiency?
- Efficiency and profits go hand in hand but sometimes maximizing them leads to
inefficiency
- Other factors important as well (e.g. income and endowment effects)
What is an income effect? An increase in ones income changes their demand
What is an endowment effect? Assigning a higher value to an item you already own
What are the four reasons for which Cooter does not believe private law is the solution to
redistribution? - High transaction costs
- Imprecise targeting
