MGT ch.4-7

Identify the characteristics of public goods and explain how they differ from private goods.

private good are goods offered for sale in stores, in shops, and on the internet Public good are goods provided by government and distinguished by nonrivalry and nonexcludability

Identify and explain efficiency (or deadweight loss) using consumer and producer surplus.

reductions in combined consumer and producer surplus caused by an underallocation or overallocation of resources to the production of a good or service.

Explain Government failure and explain why it happens.

refers to economically inefficient outcomes caused by shortcomings in the public sector •Voting problems •Principal-agent problem •Special-interest effect •Collective-action problem •Earmarks •Rent seeking behavior

Define unfunded liabilities and provide some examples.

A government creates this when it commits to making a series of future expenditures without simultaneously committing to collect enough tax revenues to pay for those expenditures.

Identify the purpose of cost-benefit analysis and explain the major difficulty in applying this analysis.

deciding whether to provide a particular public good and how much of it to provide

Distinguish between demand-side and supply-side market failures and the kinds of externalities that are created by each.

Demand-side market failures happen when demand curves do not reflect consumers' full willingness to pay for a good or service. Supply-side market failure occur when supply curves do not reflect the full cost of producing a good or service.

Explain the meaning of elastic, inelastic, and unitary price elasticity of demand.

Elastic demand - Demand is elastic if a specific percentage change in price results in a larger percentage change in quantity demanded inelastic demand- If a specific percentage change in price produces a smaller percentage change in quantity demanded, demand is inelastic Unitary price elasticity of demand- The case separating elastic and inelastic demands occurs where a percentage change in price and the resulting percentage change in quantity demanded are the same

Explain some of the difficulties associated with managing and directing the government.

No invisible hand •Massive size and scope •The need for bureaucracy •The need for paperwork and inflexibility •The information aggregation problem •Lack of accountability

Describe graphically and verbally how an underallocation of resources occurs when positive externalities are present and how this can be corrected by government action.

Subsides government provision Graph on ch.4 powerpoint, slide 27

Define, measure, and graphically identify producer surplus.

The difference between the actual price a producer receives (or producers receive) and the minimum acceptable price; the triangular area above the supply curve and below the market price. graph on ch.4 powerpoint, slide 11

https://quizlet.com/410393661/principle-of-microeconomics-chapter-5-flash-cards/

bund - political corruption

Explain why representative democracy suffers from the principal-agent problem.

conflicts that arise when tasks are delegated by one group of people (principals) to another group of people (agents)

Describe graphically and verbally how an overallocation of resources results when negative externalities costs are present and how this can be corrected by government action.

direct controls pigovian tax graph on ch.4 powerpoint, slide 26

Explain what is meant by externalities

occurs when some of the costs or the benefits of a good or service are passed onto or "spill over to" someone other than the immediate buyer or seller

Describe government policies that would reduce negative externalities.

pigovian tax

Define, measure, and graphically identify consumer surplus.

the difference between the highest price a consumer is willing to pay for a good or service and the actual price the consumer pays graph on ch.4 powerpoint, slide 8

Describe how government's power to coerce can be economically beneficial.

•Force can increase economic efficiency •Correcting for market failures •Positive externalities •Negative externalities •Reducing private-sector economic risks

Define price elasticity of demand and compute the coefficient of elasticity given appropriate data on prices and quantities.

•Measures buyers' responsiveness to price changes

Discuss the idea of clear benefits and hidden costs

•Unfunded liability •Social Security program •Medicare •Chronic budget deficit •Economic inefficiency •Debt crisis •Balanced-budget laws