Problem Set 7

If the production of a good yields a negative externality, then the social cost curve lies ____ the supply curve and the socially optimal quantity is ____ than the equilibrium quantity.

Above; Less

Positive Externality

Hillary's newly cut lawn makes her neighborhood more attractive. What type of externality is this an example of?

5, 50

In the US, the poorest fifth of the population earns about _____% of all income, and the richest fifth earns about _____%.

When the government levies a tax on a good equal to the external cost associated with the good's production, it ____ the price paid by consumers and makes the social outcome ____ efficient.

Increases; More

Public Good

National Defense is an example of a __________

Common goods/resources are...

Overused in the absence of government

Consider in the market for fire extinguishers that there is an external benefit of $10 per extinguisher. What type of externality exists; describe a government policy that would yield a socially efficient outcome?

Positive; Subsidy

In-Kind Transfer

The following are examples of _____. 1. Free meals from the local Salvation Army 2. Vouchers for low income earners to help pay for housing 3. Free dental service provided to low income earners

Utilitarianism

The philosophy perspective of equity that would mist likely advocate a progressive tax system given the belief that the redistribution of some income from the highest income quintile to the lowest income quintile would increase the total amount of benefit/satisfaction within society

Public goods are...

Underprovided in the absence of government

Private and Club Goods

Which categories of goods are excludable?

Private and Common Goods

Which categories of goods are rival in consumption?

Rawlsian Liberalism

Which philosophical perspective on equity would most likely advocate social programs to maximize the utility and well-being of the lowest income earners in society?

Libertarianism

Which philosophical perspective on equity would most likely suggest a flat tax rate system?

The Coase Theorem does not apply if...

transaction costs make negotiating difficult.