micro ch 4 and 5

external

safety provided by a motion-detector light is an example of a ______________ benefit

decreasing, increases the supply, increases

A tax can correct for a negative externality and a subsidy to producers can correct for a positive externality because the tax shifts the cost onto the firms, producing the product and _____________ output, and the subsidy _____________ _____ ___________ and _____________ output.

earmark

An _____________ is a provision inserted into a discretionary spending appropriations bill that directs funds to a specific recipient while circumventing the merit-based or competitive funds allocation process.

rent seeking

An example of _________ _______________ would be a domestic industry group using resources to try to block imports.

short, long

Consider: "Politicians would make more rational economic decisions if they weren't running for reelection every few years." This statement recognizes that political officeholders who must seek voter support will favor programs with ________-term benefits and reject programs with _________-term benefits.

financial

Elected officials often accommodate rent-seeking behavior, particularly by firms, unions, and professional groups located in their home states, because these groups support the elected officials with _______________ and non-financial resources.

c

In a market economy, the government's power to coerce can: A. undermine economic efficiency by increasing private-sector risk. B. improve economic efficiency by directing all resources to their most valued uses. C. reduce private-sector risk and increase economic efficiency. D. cause significant negative externalities.

d

Information problems create inefficient outcomes in: A. the private sector but not the public sector. B. the public sector but not the private sector. C. neither the private nor the public sector. D. both the private and the public sectors.

smaller, significant, individual

Jean-Baptiste Colbert was the Minister of Finance under King Louis XIV of France. He famously observed, "The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing. "How does his comment relate to special interests and the collective-action problem? A ___________ group will be more active in seeking _____________ group gains than a larger group who faces small losses at the _______________ level.

less, more

Producing ________ than equilibrium leaves unrealized producer and consumer surplus, and producing _________ than equilibrium reduces the consumer surplus.

private, profit

Public bureaucracies are possibly less efficient than business firms because the _________ market is driven by __________, but this competitive force does not operate in public bureaucracies.

privately, nonrival

Public goods are not ______________ provided because when goods are ___________, those people purchasing the good could simply allow others use without requiring compensation.

political

Rent seeking is different from profit maximization because rent seeking attempts to increase profit by influencing the _______________ process.

rent-seeking behavior

Suppose American winemakers convince the federal government to issue a directive to serve only domestically produced wine at government functions. This would be an example of:

rent-seeking behavior.

Suppose American winemakers convince the federal government to issue a directive to serve only domestically produced wine at government functions. This would be an example of:

rent seeking

Tammy Hall is the mayor of a large U.S. city. She has just established the Office of Window Safety. Because windows sometimes break and spray glass shards, every window in the city will now have to pass an annual safety inspection. Property owners must pay the $5-per-window cost—and by the way, Tammy has made her nephew the new head of the Office of Window Safety.This new policy is an example of:

public, private

The U.S. border patrol is a ____________ good, but satellite TV is a ____________ good.

Coase

The ___________ theorem states that when transaction cost are low, two parties will be able to bargain and reach an efficient outcome in the presence of an externality.

internalize, external

The government could correct the difference between the equilibrium output level and the efficient output level by... using a regulation that requires firms to __________________ the _____________ costs.

b

The government's ability to coerce can enhance economic efficiency by: A. eliminating income inequality. B. correcting market failures. C. preventing resources from going to their most valued uses. D. restraining self-interest.

a

The many layers of the federal government in the United States: A. lead to economic inefficiencies because of difficulty aggregating and conveying information. B. enhance government's ability make effective decisions quickly. C. better allow the invisible hand to direct government resources to their best uses. D. improve accountability of government officials, thus leading to more efficient policies.

decisions

The principal-agent problem- occurs when one person or entity, is able to make ____________ and/or take actions on behalf of, or that impact, another person or entity: the "principal"

positive, negative

The problem of limited and bundled choice in the political process tends to reduce economic efficiency because a politician chooses programs with ___________ and ___________ net benefits.

less

To an economist, a government program is too big if an analysis of that program finds that MB is ______ than MC.

greater

When negative externalities exist at a market, equilibrium output will be ____________ than the efficient output.

d

Which of the following is a key difference between the economic activities of governmentand those of private firms? A. Private firms face the constraint of scarcity; government does not. B. Government focuses primarily on equity; private firms focus only on efficiency. C. Private economic activities create externalities; government activities do not. D. Government has the legal right to force people to do things; private firms do not.

a

Which of the following is an activity of government that is not an activity of private firms? A. Enforcing involuntary transactions. B. Paying equitable wages. C. Creating positive externalities. D. Pursuing economic efficiency

free rider

________ ________ problem- people benefit from the public good without contributing to the cost.

supply

________ sided failure occurs when a firm does not pay the full cost of producing its output external costs of producing the goods are not reflected in supply curve does not reflect the full cost of producing a good or service

public good

__________ __________ is nonrival and non excludable

quasi

__________ public goods could be provided through the market system bc of positive externalities, the gov produces them schools, streets, museums

private

___________ goods characteristics rivalry excludability

demand

___________ sided failure when it is not possible to charge consumers for a product some can enjoy benefits without paying firms not willing to produce since they cant cover costs curve does not reflect consumers willingness to pay

market failures

____________ _____________ typically occur when resources are over or under allocated

central, independent

_____________ and ___________________ banks are in charge of the monetary policy

consumer

_____________ surplus- how much the consumer is willing to pay minus the actual price represented by a triangle under the demand curve

unfunded liabilities

______________ ______________ occur when politicians commit to making a series of future expenditures without simultaneously committing to collect enough tax revenues to pay for those expenditures.

Unfunded liabilities

_______________ _______________ are debt obligations that do not have sufficient funds set aside to pay the debt social security, medicare

Regulatory

_______________ capture is a corruption of authority that occurs when a political entity, policymaker, or regulatory agency is co-opted to serve the commercial, ideological, or political interests of a minor constituency, such as a particular geographic area, industry, profession, or ideological group

producer

_______________ surplus- how much the producer receives minus the minimum price they would accept actual price- minimum acceptable price represented by triangle above the supply curve and below the actual price

Subsidies

________________ are payments from the government that decrease producers' costs. promotes consumption and production

negative

________________ externality too much is produced supply side market failures

Opportunity cost

_________________ _________ is the amount of other products that must be forgone or sacrificed to produce a unit of product.

positive

_________________ externality too little is produced demand side market failure

Externality

_________________- an economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume

externality

an ________________ is the cost or benefit that affects a third party who did not choose to incur that cost or benefit.

rent seeking

an appeal to the government for special benefits at the taxpayers' or someone else's expense.

maximized

competitive markets are efficient because... by producing up to the point where MB = MC, profits are ______________ and the maximum potential consumer surplus and producer surplus is generated.

Pigovian

correcting negative externalities direct controls A _____________ tax is a tax on any market activity that generates negative externalities.

provisions

correcting positive externalities subsidies government _______________

consumers, production, surpluses

efficiently functioning markets demand curve reflects ____________ willingness to pay supply curve must reflect all costs of _________________ benefit ______________ are maximized for consumers and producers

positive

government provisions governments can control the supply of goods that have ____________ externalities by supplying a high amount of education, public roads, parks, libraries, etc.

unsolicited

in the Last Word section, the concept of pork-barrel politics is illustrated by the purchasing of _____________ military equipment

demand, supply

market failure categories _________ sided __________ sided

logrolling

one group of legislators helps another with the understanding that at some point in the future they, in turn, will be helped.

fiscal, monetary

two types of macroeconomics stabilization __________ policy ______________ policy