CH 16 HW REVIEW

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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


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