Question

economics 2025-26 unit 3 study guide

1. an __________ is a cost or benefit from a transaction that affects someone who is not directly involved in the transaction.
2. a __________ is an external cost, like pollution that harms nearby residents.
3. a __________ is an external benefit, like vaccinations that help reduce disease for others.
4. a __________ is a tax designed to make decision-makers take external costs into account.
5. a __________ is a payment that lowers private cost or raises private benefit to encourage more of an activity.
6. __________ are legal rights to use, control, and transfer a resource.

part ii – price controls
a. fill in the blank

1. a binding ________ (maximum price) set below equilibrium usually leads to a ________ of the good.
2. a binding ________ (minimum price) set above equilibrium usually leads to a ________ of the good.
3. under a rent control law, landlords may respond by reducing __________ or maintenance of apartments.
4. thomas sowell argues that price controls often lead to unintended __________ that can be more important than the goals of the policy.
5. when prices are free to move, they help coordinate the actions of ________ and ________.

Explanation:

These are key terminology and concept questions from economics, focusing on externalities, policy tools for externalities, property rights, and price controls. Each blank is filled with the standard economic term matching the definition provided.

Answer:

First Section (Externalities & Related Concepts)

1. externality
2. negative externality
3. positive externality
4. Pigouvian tax
5. subsidy
6. Property rights

Part II – Price Controls (Fill in the Blank)

1. price ceiling; shortage
2. price floor; surplus
3. quality
4. consequences
5. buyers; sellers