Government Intervention and Market Efficiency (Unit 7)
Tax Burden
Actual economic impact of a tax on individuals.
Equity vs. Efficiency
Balancing fairness with optimal resource allocation.
Inelastic Demand
Demand changes little despite price fluctuations.
Elastic Demand
Demand changes significantly with price variations.
DWL (Deadweight Loss)
Economic inefficiency resulting from market distortions.
Public Services
Essential services provided by government to citizens.
Enforcement Costs
Expenses related to ensuring compliance with regulations.
Pandemic Response
Government actions to manage public health crises.
Public Welfare
Government programs to support citizens' basic needs.
Taxation
Government revenue collection through imposed levies.
Regulation
Government rules to control economic activities.
Window Tax
Historical tax based on number of windows in homes.
Self-Interested Agents
Individuals acting primarily for personal gain.
Government Failure
Inefficiencies arising from government intervention.
Free Market Inefficiency
Market fails to allocate resources optimally.
Logrolling
Political practice of mutual support for legislation.
Median Voter Model
Political theory predicting policy outcomes based on majority preferences.
Political Popularity
Public support influencing government policy decisions.
Private Provision
Services offered by non-governmental entities.
Commuter Tax
Tax levied on individuals commuting to work.
Buyers of books could be subsidized to generate socially efficient quantity
This graph shows a perfectly competitive unregulated market for books with marginal social cost (MSC), marginal social benefit (MSB), and marginal private benefit (MPB). Which of the following statements is true based on this graph?
Positive externality; WYX
This graph shows the marginal cost (MSC), marginal social benefit (MSB), and marginal private benefit (MPB) of good that is sold in a perfectly competitive market What kind of externality is this, and what area represents the deadweight loss generated if this market is unregulated?
A per-unit subsidy of $4 per unit
This graph shows the marginal social cost (MSC), marginal private benefit (MPB), and the marginal social benefit (MPB) associated with the market for snizzles. If the government wants to intervene in this market, which of the following policies most likely leads to the optimal quantity being sold in this market?
Deadweight loss increases
This graph shows the marginal social cost (MSC), marginal private benefit (MPB), and the marginal social benefit (MPB) associated with the market for snizzles. Which of the following best describes what happens if the government imposes a price floor of $14?
A per-unit subsidy of Pb - Pd
This graph shows the marginal social cost (MSC), marginal social benefit (MSB), and marginal private benefit (MPB) of a good that is sold in perfectly competitive market. A government could correct this externality by:
A per unit subsidy of $8 to buyers
This graph shows the market for flazzles, including the marginal social benefit (MSB), marginal social cost (MSC), and marginal private benefit (MPB). If a government wants to correct the externality shown in this market, which of the following would be the best choice?
A per-unit subsidy of Pd - Pb
This graph shows the market for vaccines, including the marginal social benefit (MSB), marginal social cost (MSC), and marginal private benefit (MPB). The government can attempt to correct this externality by setting
They don't alter marginal cost.
Which of the following best describes why lump-sum taxes on producers don't eliminate deadweight loss in the short run in a market with a negative externality?
A per unit tax equal to the external cost of production.
Which of the following would be most effective at reducing the deadweight loss associated with a negative externality?
A per unit tax of Px - Pz
The graph below shows the marginal social cost (MSC), marginal private cost (MPC), and marginal social benefit (MSB) in the market for kablams. Which of the following would most likely eliminate the deadweight loss associated with production of kablams?
Qb, Pv.
The graph shown here illustrates the marginal social cost (MSC), marginal private cost (MPC), demand (D), and marginal revenue (MR) for the only firm producing plastic in a market. What is the socially optimal quantity and price?
a per-unit tax on sellers of $12
The marginal social cost (MSC), marginal private cost (MPC), and marginal social benefit (MSB) associated with the production of a good are shown in this graph. If the government wants to intervene in this market to eliminate deadweight loss, which of the following is the best choice?
ACD
The marginal social cost (MSC), marginal private cost (MPC), and marginal social benefit (MSB) associated with the production of a good are shown in this graph. If this market is unregulated, what area represents deadweight loss?
P=$20, Q=20
The marginal social cost (MSC), marginal private cost (MPC), and marginal social benefit (MSB) associated with the production of a good are shown in this graph. What is the socially optimal price and quantity in this market?
