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| Unequal knowledge possessed by the parties to a market transaction such that either buyers or sellers have incomplete or inaccurate information, resulting in a market failure as cost of obtaining more information is prohibitive. |
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| The tendency of one party to a contract or agreement to alter his or her behavior after the contract is signed in ways that could be costly to the other party. |
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| Adverse Selection Process |
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| Arises when information known by the first party to a contract or agreement is not known by the second and second party incurs major costs. |
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| The economic analysis of government decision-making, politics, and elections that aids in the comprehension of how government failure is related to changes in government function and their impact on efficiency. Government response to market failures can actually harm the economy worse than the failure itself. |
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| Comprised of people charing same strong preferences that use direct persuasion and advertisements to convince others of the merits of the public good under consideration. |
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| The trading of votes to secure desired outcomes that is popular in state legislatures and may either increase or decrease economic efficiency. |
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| Situation in which society may not be able to rank it preferences consistently through paired-choice majority voting. Deducation of paired-choice voter preference can be incorrect as the preference is dependent upon the order in which the votes are taken. |
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| Suggests that under majority rule and consistent voting preferences, the median voter will in a sense determine the outcome of elections. Extreme voters on an issue prefer the median choice rather than the other extreme position which is how the median vote predominates. |
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| Refers to economically inefficient outcomes cuased by shortcomings in the public sector that can occur due to limited voter information but most commonly happen despite government officals knowing what voters prefer. Incentive structures prompt officials to place own interests ahead of the public's. |
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| Conflicts that arise when tasks are delegated by one group of people (principals) to another group of people (agents) as the agents may not hold same interests as the principals. Often occurs when politicians focus on the aim of re-election rather than pursuing the best interests of their constituents. |
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| Any outcome of the political process whereby a small number of people obtain a government program or policy that gives them large gains at the expense of a much greater number of persons who individually suffer from small losses. |
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| Means of securing a government project that yields beneftis mainly to a single political district as taxpayers of a larger geographical area will foot the bill. |
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| The insertion of specific provisions that authorize spending for local projects into comprehensive Congressional legislation. |
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| Appeal to government for specific beneftis at taxpayers' or someone else's expense aimed at obtaining extra profit from favorable government policies. |
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| Unlawful misdirection of actions or governmental resources that occurs when government officials abuse their entrusted powers for personal gain. |
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