| A | B |
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| bid rigging | an illegal, anticompetitive practice in which two or more firms agree in advance which one will submit the lowest bid for a contract offered through a competitive bidding process |
| cap and trade | a policy that limits the amount of pollution a firm may legally emit each year but allows firms to trade with each other to obtain additional pollution permits |
| cash transfer | a direct payment of cash by the government to an individual |
| command-and-control policies | a policy approach—often applied to environmental policy—that relies on rules and enforcement, rather than market incentives, to influence behavior |
| common resource | A resource that everyone has access to and that can easily be overused or destroyed. Examples include the atmosphere and the oceans. |
| corrective tax | a tax on producers that is designed to reduce negative externalities, such as pollution |
| deregulation | The process of removing government restrictions on firms in order to promote competition or encourage economic activity |
| Earned Income Tax Credit | a tax reduction given to low-wage workers when they file their federal income tax forms; its goal is to raise the incomes of poor people without discouraging them from working |
| economic mobility | the ability of people to raise their standard of living and improve their economic status |
| economic stimulus | a policy or action designed to promote business activity and stimulate economic growth |
| eminent domain | The power of a government to take an individual’s property for public use if the owner is fairly compensated |
| government failure | Inefficient allocation of resources caused by government intervention in the economy |
| income redistribution | a policy designed to reduce income inequality by taking money from the rich and distributing it to the poor |
| in-kind transfer | a government benefit in the form of goods or vouchers, such as food stamps and public housing |
| logrolling | a practice in which law-makers agree to vote for each other’s legislation |
| market-based policies | a policy approach—often applied to environmental policy—that relies on market incentives, rather than regulation, to influence behavior |
| market division | an illegal, anticompetitive practice in which two or more firms agree to divide a market among themselves, selling only to certain customers or in certain geographic areas |
| means-tested program | a government benefit that is tied to family income so that benefits are reduced as income rises; examples include food stamps and welfare payments |
| merger | The combining of two or more separately owned firms into a single firm |
| poverty rate | The percentage of the population that has a family income below a government-defined threshold, or poverty line |
| poverty threshold | the estimated minimum income needed to support a family |
| price fixing | an illegal, anticompetitive practice in which two or more firms agree to set a common price for a good or service |
| privatize | to convert a publicly owned resource or institution to private ownership |
| public provision | the supplying of a good or service by the government; examples include the services provided by publicly supported schools and universities |
| quintile | any one of the five groups of a population that has been divided into fifths for the purpose of data analysis; for example, the top quintile of a country’s population in terms of income represents the top fifth of all earners |
| quota | the maximum amount of a resource that a person is allowed to use or consume in a given period of time |
| regulation | The establishment, by the government, of rules aimed at influencing the behavior of firms and individuals. Regulation can involve setting prices, establishing product and workplace standards, and limiting entry into an industry. |
| regulatory agency | A unit of government created to set and enforce standards for a particular industry or area of economic activity |
| tragedy of the commons | a circumstance in which a shared resource is overused or destroyed because users take no responsibility for its preservation |
| unemployment insurance | a government program providing limited cash payments to workers who lose their jobs |
| voucher | a coupon used to purchase a specific good or service |
| Takings Clause | a clause of the Fifth Amendment to the Constitution stating that the government must pay private owners when their property is taken for public use under the power of eminent domain |
| market failures | a situation in which the market fails to allocate resources efficiently |
| externality | a cost or benefit that arises from production or consumption of a good or service that falls on someone other than the producer or consumer; a spillover or side effect of production or consumption |
| negative externality | a cost of production or consumption that falls on someone other than the producer or consumer; a negative side effect |
| positive externality | a benefit of production or consumption that falls on someone other than the producer or consumer; a positive side effect |
| technology spillover | a benefit that results when technical knowledge spreads from one company or individual to another, thereby promoting new innovations |
| public goods | goods and services that are used collectively and that no one can be excluded from using; public goods are not provided by markets |
| private goods | goods and services that are sold in markets; distinct from public goods |
| excludable | a characteristic of a good or service whose use can be denied to those who do not pay for it; a feature of private goods |
| nonexcludable | a characteristic of a good or service whose use cannot be denied to anyone; a feature of public goods |
| rival in consumption | a characteristic of a good or service that cannot be used or consumed by more than one person at the same time; a feature of private goods |
| nonrival in consumption | a characteristic of a good or service that can be used or consumed by more than one person at the same time; a feature of public goods |
| free-rider problem | a free rider is someone who enjoys the benefit of a good or service, such as roads or public schools, without paying for it; free riding becomes a problem when it leads to underproduction of that good or service |
