CH 16 HW REVIEW
List the economic functions of governments
-establish & maintain property rights -provide non market mechanisms for allocating scarce resources, -redistribute income & wealth
Does the free-rider problem in international defense mean that the world has too little defense against aggression? How do nations try to overcome the free-rider problem among nations? The free-rider problem described in this news clip is that __.
23 out of 28 NATO nations who are not paying their allocated share of defense expenses are receiving NATO protection
Cable TV
A good or service that is both nonrival and excludable is a natural monopoly good. Potential users of a natural monopoly good can be excluded if they don't pay, but having paid for access use of the good is nonrival.
Explain why public choices might lead to the overprovision rather than the underprovision of a public good.
The goal of bureaucrats is to maximize their department budget. Rationally uninformed voters enable bureaucrats to meet this goal and overprovide public goods
Which of the following is an example of a voucher?
The government gives each student a token worth $15,000 per year to be used to pay tuition.
What are the problems with Medicare and Medicaid?
The scale of expenditure on Medicare and Medicaid relative to what is spent in other rich countries suggests that these programs overprovide.
__ is a private good, __ is a public good, & __ is a common resource
a car; a freeway; oxygen in the atmosphere A private good is a good or service that can be consumed by only one person at a time and by the person who has bought it or owns it. A car is a good that can be consumed by the person who owns it, so a car is an example of a private good. A public good is a good or service that can be consumed simultaneously by everyone and from which no one can be excluded. A freeway is a good that can be used by everyone at one point in time. So a freeway is an example of a public good. A common resource is a resource that can be used only once, but no one can be prevented from using what is available. Oxygen in the atmosphere available to one person is not available to others but no one can be prevented from using oxygen for breathing. So oxygen in the atmosphere is an example of a common resource.
__ is rival & __ is nonrival
a seat on a bus at rush hour; national defense A good, service or resource is rival if its use by one person decreases the quantity available for someone else. A seat on a bus at rush hour can be used by only one person at a time, so it is an example of a rival good. A good, service or resource is nonrival if its use by one person does not decrease the quantity available for someone else. National defense used by one person does not lower the level of defense enjoyed by others in the country, so it is an example of a nonrival good.
Under Obamacare,
a subsidy puts a gap between what the insured pays and the insurer receives and increases the number of families covered
The government provides public education because education
brings benefits that spill over to others
__ is excludable & __ is nonexcludable
camera; a concert in a public park If a good, service or resource is excludable, it is possible to prevent someone from enjoying its benefits. A camera can belong to one person and cannot be used by all, so a camera is an example of an excludable good. If a good, service or resource is nonexcludable, it is impossible to prevent someone from enjoying its benefits. A concert in a public park is open to anyone, so it is an example of a nonexcludable service.
Healthcare is a special good that is provided by government because
consumers and potential consumers of healthcare underestimate its benefit, underestimate their future needs, and can't afford the care they need
Public choice
decision that has consequences for many people & perhaps for an entire society
Because the marginal social benefit from healthcare __ the marginal benefit perceived by its consumers, a competitive market in healthcare would __ it.
exceeds; underprovide
A natural monopoly good is
excludable & nonrival
A private good is
excludable & rival
In the political marketplace,
firms engage in lobbying activity to persuade politicians to propose policies that benefit them
Government failure can arise because
government is made up of many individuals, each with their own economic objectives
A competitive market in healthcare isi
inefficient and unfair
The free-rider problem in international defense means that the world has too ______ defense against aggression. Nations try to overcome the free-rider problem in international defense by
little; signing treaty agreements to reduce weapons or to develop new weapon systems
Obamacare seeks to
make quality, affordable, private health-insurance plans available for those currently uninsured and stop insurance companies denying coverage of pre-existing conditions
The free-rider problem makes the private provision of a public good inefficient because
no one will pay for the public good and the firm will make zero revenue
A public good is
non excludable & nonrivial
A common resource is
non excludable & rival
The Santa Monica beach is
not categorized as a private good, a public good, or natural monopoly It is a common resource.
A skateboard is a
private good A good or service that is both rival and excludable is a private good. It can be consumed by only one person at a time and only by the person who has bought it or owns it.
Chewing gum is __
private good A good or service that is both rival and excludable is a private good. It can be consumed by only one person at a time and only by the person who has bought it or owns it.
The New York City subway is
private good It is excludable, and when crowded, it is rival.
Healthcare & education are not public goods because they are
rival & excludable
Government failure
situation in which government actions lead to inefficiency - to either under provision/ overprovision
The principle of minimum differentiation suggests that political parties will
tend to become similar as they try to appeal to a majority of voters
A political equilibrium occurs when
the choices of all participants are compatible & can't be improved on
The United Kingdom and Canada, the major unresolved problem in their healthcare systems is
the long wait time for treatment
Governments play a large role in the markets for healthcare & education because
the majority of voters want these services to be available on the basis of need & not on the basis of need & not on the basis of willingness to pay
The market economy would produce too little healthcare because
the marginal social benefit from healthcare exceeds the marginal benefit perceived by its consumers
The free-rider problem is that
the market would provide an inefficiently small quantity of a public good
One of the problems that makes healthcare a government-provided service is that consumers and potential consumers of healthcare
underestimate its benefit and their future needs
In the United Kingdom and in Canada, healthcare delivery features
universal coverage and a single payer
Rational ignorance suggests that
voters are ignorant on issues that are not of special interest to them
Competition among politicians for votes results in an efficient provision of a public good when
voters are well informed about the effects of policies
The political equilibrium provides public goods in excess of the efficient quantity if
well-informed interest groups are combined with rational ignorance of some voters
