Failure Markets

Réussis tes devoirs et examens dès maintenant avec Quizwiz!

Nonrival goods

one person's consumption of this good does not effect another person's consumption of it

Private markets fall to provide the optimal amount of some goods, such as public fireworks displays, because:

private companies will have difficulty getting anybody to pay for them.

The supply of a good or service that reflects only the private costs of its production is called __________

private supply

_________ rights involve the exclusive right to determine how a resource is used.

property

Externalities occur when

property rights are not clearly defined

good that is both nonrival and nonexcludable is called ________ good.

public

According to the Coase Theorm, if a property right is well defined and transaction costs aare low,

resources will gravitate to their highest valued use

When the consumption of a good or service by one person reduces the quantity available for consumption by other, the goods and services with this characteristic are ___________ goods.

rivalrous

__________ demand is the demand for a good or service that reflects both the private and external benefits of its consumption.

social

When externalities exist,

the outcome observed may not be he most efficient outcome

_________ costs involves the costs, in terms of time, energy, and resources,associated with searching out, negotiating and completing a transaction

transaction

T or F: Sometimes private markets can successfully provide public goods

true

At the optimal level of pollution to be cleaned up

-the marginal benefit of preventing pollution equals the marginal cost of preventing pollution. -welfare gains from pollution prevention are maximized.

The market produces the right goods in the correct amounts, using the fewest resources possible when

-there is productive efficiency -there is allocative efficiency

Private demand is the demand for a good or service that considers only the private _________ of its consumption.

benefits

When __________ exist, outside intervention may be able to improve the market outcome, increasing efficiency and economic surplus

externalities

excludable goods

firms use prices to determine who can consume this type of good

Most susceptible to poorly- defined or difficult to define/enforce property rights?

ideas

When the marginal cost of pollution prevention _________, the equilibrium quantity of pollution prevention.

increase, decrease decrease, increase

Why do countries with relatively high incomes spend more on pollution prevention then countries with relatively low income.

- as income rises the demand for clean air and water rises - High income countries have more money to devote to pollution prevention

From an economic perspective, pollution involves _________ and ________

- costs - benefits

excludable or nonexcludable - movie theater - city sidewalk - public lighthouse - restaurant - lecture at a private university

- excludable - excudable - nonexcludable - excludable - excludable

What is a solution to the free- rider problem

- new technology to make the good excludable - use a public good to self advertising - government taxes revenue to supply public goods

When a _____ extremality exists, the socially optimal level of output will be greater than that resulting from a ______ market.

- positive - private

Social marginal cost is the sum of _________ marginal cost and ____________ marginal cost

- private - external

When there are positive externalities, governments intervene in the marketplace to stimulate demand toward the socially efficient level through

- subsidies - tax credits

The benefits of taxing a product with a negative externally include

-a reduction in the quantity traded in the market; -a reduction in the damage to people outside the market; -additional tax revenues that can be used to help clean up the damage caused by the externality itself

What would you expect to increase the optimal level of pollution prevention?

-marginal cost of pollution decreases -marginal benefit of pollution prevention increases (shift to the right)

Social supply is the supply of a good that reflects both the __________ and ________ costs of its production.

-private -external

Governments can provide _______ goods,because they have the ability to force people to ________ for a good or service by collecting taxes.

-public - pay

nonecludable goods

Consumers cannot be prevented form consuming these goods

_________ occurs when property rights are not clearly defined.

Externalities

The benefit enjoyed by or cost imposed on a third party that is not directly involved in the production or consumption of a good or service is called

Externality

Rival goods

If I consumer this good, another person cannot consumer it at the same time

T or F: Not all goods provided by the government are public goods.

True

Suppose you live near a large factory that produces a good that you do not consume. If you are subjected to loud noises and bad odors from the factory, then you experienced....

a negative externality

The unpaid benefit of an activity that is enjoyed by the third party is called

a positive externality

Something we would rather have less of is called

an economic bad

When the market does not produce an output level that maximizes total surplus, it is called a

market failure

When a positive externality exists, the socially optimal level of output will be ________ than that resulting from a private market. F

more

When a ________ externality exists, the socially optimal level of output will be less than that resulting from a private market.

negative

When people consume a nonexcludable good without paying for it, it is called...

the free-ride problem.


Ensembles d'études connexes

Ch 9 - Phys & Cog Dev, Middle Childhood

View Set

A tale of two India's chapter review

View Set

Personal Finance: Unit 3 Chapter 14

View Set