What does it mean when we say the market "works"?
Be certain you can explain the three different reasons we reviewed that can explain why the market will fail at times (externalities, undefined property rights (tragedy of the commons) and public goods).
What are the two types of externalities? Positive/Negative - be certain you are able to explain what happens in both cases (i.e. what is going on with marginal social benefit, marginal social costs and marginal private benefits and marginal private costs)?
Positive Externality:
Negative Externality:
What are some solutions for market failures? Tax, Fines, Subsidies, Prohibit, Define property rights, government provides the good/service.
Review asymmetric information, adverse selection, moral hazard, free riding.
Do we want zero percent pollution? Why or why not?
What is human capital?
What is the differential wage compensation?
What are the types of discrimination (personal prejudice, statistical)?
How is discrimination explained in economics - how does it differ with the differential wage compensation?
What is the basic premise for free trade to occur? Does everyone benefit from trade? What is meant by free trade? Does it exist in the world to date?
Why is trade beneficial? Does everyone benefit from trade? Why or why not?
Why do countries trade? Explain.
What is the Law of Comparative Advantage?
What are some of the reasons given to restrict trade? Do you believe any are legitimate reasons?
What are some of the different trade barriers out there? Know three of them.