Unit 6

Question 1

enforce laws and contracts

module 6.1

Answer 1

role of government

Question 2

maintain competition

module 6.1

Answer 2

role of government

Question 3

REDISTRIBUTE INCOME

module 6.1

Answer 3

role of government

Question 4

PROVIDE PUBLIC GOODS

module 6.1

Answer 4

role of government

Question 5

CORRECT MARKET FAILURES - EXTERNALITIES

module 6.1

Answer 5

role of government

Question 6

stabilize the economy

module 6.1

Answer 6

role of government

Question 7

economics of social efficiency

module 6.1

Answer 7

strive to be efficient but must accept issues like pollution

Question 8

Pollution

module 6.1

Answer 8

side effect of activities that provide food, clothing, power…

Question 9

Marginal social cost of pollution (MSC)

module 6.1

Answer 9

additional cost from pollution, pollution that is released in the air

Question 10

Marginal social benefit of pollution (MSB)

module 6.1

Answer 10

additional benefit from pollution, products and services that benefit us

Question 11

socially optimal point

module 6.1

Answer 11

MSC = MCB - society accepts level of cost compared to level of benefit

Question 12

free rider

module 6.1

Answer 12

someone who benefits from a public good, but doesn’t pay for it - hard to exclude them because it’s a public good

Question 13

external costs

Answer 13

a cost an individual or firm imposes on others without compensating them

Question 14

external benefit

Answer 14

an individual or firm confers a benefit on others without receiving compensation

Question 15

negative externalities

Answer 15

external costs to society (air pollution)

Question 16

positive externalities

Answer 16

external benefit (education)

Question 17

marginal private benefit

Answer 17

demand curve only looks at marginal benefit for consumer

Question 18

individual benefits

Answer 18

MPB=MSC - equilibrium

Question 19

marginal social benefit

Answer 19

benefit to society - positive externality - MSB>MPB

Question 20

marginal private cost

Answer 20

supply curve only looks at marginal cost for consumers

Question 21

individual cost

Answer 21

MPC=MSC - equilibrium

Question 22

marginal social cost

Answer 22

MSC>MPC - cost to society - negative externality

Question 23

socially optimal point

Answer 23

MSC=MSB (MPC=MSC) (MPB=MSB)

Question 24

excludability

Answer 24

suppliers exclude people that can not afford to buy their product

Question 25

rival in consumption

Answer 25

same unit cannot be consumed by more than one person at a time

Question 26

private good details

Answer 26

excludable and rival in consumption

Question 27

public good details

Answer 27

non excludable and non rival in consumption

Question 28

common resource

Answer 28

nonexcludable good yet with rival in consumption (fish in Great Lakes fishing area)

Question 29

firms requirements regarding spillovers

Answer 29

produce good with spillover benefits but not products with spillover costs

Question 30

tax efficiency

Answer 30

when taxes minimize the direct / indirect costs of tax collection

Question 31

tax fairness

Answer 31

when the ‘right people’ actually bear the burden of taxes

Question 32

proportional tax

Answer 32

same percentage regardless of income

Question 33

progressive tax

Answer 33

tax increases as income increases

Question 34

regressive tax

Answer 34

high income pays smaller share than low income pays

Question 35

types of tax (examples)

Answer 35

income, property, sales, profits, property, wealth

Question 36

negative externalities - pigouvian taxes

Answer 36

taxes that are designed to correct for inefficiencies of social costs

Question 37

positive externalities - pigouvian subsidies

Answer 37

a payment designed to correct for inefficiencies of social benefit

Question 38

poverty threshold

Answer 38

minimum annual income that is considered adequate to purchase necessities

Question 39

poverty rate

Answer 39

percentage of pop. with income lower than poverty threshold

Question 40

benefits principle - tax mindset

Answer 40

those who benefit from public spending should bear the burden of the tax that pays for that spending

Question 41

ability to pay principle - tax mindset

Answer 41

those with a greater ability to pay should pay more tatxes

Question 42

compensating differentials

Answer 42

impact on wages - wage differences across jobs that reflect that some jobs are more dangerous or less pleasant than other jobs

Question 43

unions

Answer 43

impact on wages - organizations that look to improve wages and working conditions for groups of workers

Question 44

efficiency wages

Answer 44

impact on wages - wages that exceed the market equilibrium wage rate so that workers are motivated to work hard and stay with a job

Question 45

what is the Lorenz curve

Answer 45

shows unequal distribution in income

Question 46

gini coefficient

Answer 46

number that summarizes a country’s level of income inequality based on how unevenly income is distributed

Question 47

means-testing program

Answer 47

program only available to individuals or families who’s income falls below a certain level

Question 48

in kinds benefit

Answer 48

benefit given in a form of a good or service

Question 49

negative income tax

Answer 49

program that supplements the income of low income workers

Question 50

marginal cost pricing

Answer 50

when regulators set a monopolies prices equal to its marginal costs

Question 51

average cost pricing

Answer 51

when regulators set a monopolies prices equal to its average costs