Econ 2.7

What is generally true- in terms of needs and wants- about families whose income is below the poverty threshold?

-The poverty threshold is adjusted based on the cost of the goods a family needs to buy. As prices rise, so does the poverty threshold. Government programs aim to raise the standard of living.

Why does the construction of a bridge over a rive represent a market failure, but the construction of an apartment building does not?

-construction of a bridge represents a market failure because it is a public good and it is effected by the free-rider problem. -construction of an apartment building does not represent a market failure because people are always going to need a place to live. rent payments become competitive, it is not a public good because you have to pay for the accommodations you choose,

2 cost benefit criteria must be met for something to be produced as a public good

-the benefit to each individual is less than the cost that each would have to pay if it were provided privately -the total benefits to society are greater than the total cost

What does the gov do in response to negative externalities

1. Regulation 2. Market based incentives (pigouvian taxes, pollution permits, subsidies)

public goods

Goods, such as clean air and clean water, that everyone must share.

What is the goal of government welfare programs

Raise peoples standard of living as measured by the ability to purchase the goods and services they need and want

free rider

a person who receives the benefit of a good but avoids paying for it

market failure

a situation in which a market left on its own fails to allocate resources efficiently

How might the government BEST manage the negative externality of litter in the form of bottles and cans?

an economic side effect of a good or service that generates benefits or costs to someone other than the people deciding how much to produce or consume the government or the EPA can issue incentives to companies who start making bottles and cans out of recyclable or biodegradable materials they can invest in education on recycling and environmental effects

poverty threshold

an income level below that which is needed to support families or households

Why would the free rider problems prevent a private business from investing in the building of a city sidewalk?

free riders are those who utilize goods without contributing their fair share. This can prevent a private business from investing in the building of a sidewalk of a city sidewalk because they would not get money from each person who walks on it because anyone could walk on it and they wouldnt even have to pay

welfare

government aid to the poor

2 reasons national defense an example of a public good?

national defense is more efficient run as a government entity and it is paid for through government collection of taxes

infrastructure

the basic framework of a building or a system

Externality

the impact of one person's actions on the well-being of a bystander

private sector

the part of the economy that involves the transactions of individuals and businesses

public sector

the part of the economy that involves the transactions of the government