Chapter 13: Market Failure and Government Regulations Flashcards Preview

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Flashcards in Chapter 13: Market Failure and Government Regulations Deck (41)
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1
Q

The market is its own _____

A

guardian or regulator

2
Q

What are the three factors of Market Failure

A

Insufficient Information ( to consumers )
Externalities ( of a particular action )
Public Goods

3
Q

This factor of Market Failure limits individuals to make intelligent decisions, and therefore rely on pure luck rather than informed behavior in purchasing goods or services.

A

Insufficient Information

4
Q

The actions of an economic agent affect the welfare of a third party and not just those buyers or sellers.

A

Externalities

5
Q

Its intrinsic characteristics make it difficult to be allocated by private markets.

A

Public Goods

6
Q

When market fails to achieve an optimal allocation of resources we refer to that as a

A

Market Failure

7
Q

The foundation of the market system is built on the assumption that consumers are _____ and ______

A

Rational and Acquisitive

8
Q

Consumers’ demand is sometimes guided by “____”

A

“Word of Mouth”

9
Q

Insufficient information an be remedied by

A

Efficient Economic Reporting

10
Q

Perverse behavior can be countered by

A

Persuasive pronouncements by credible public figures

11
Q

It is an effect from one activity which has consequences for another activity but it is not reflected in market price.

A

Externality

12
Q

An Externality occurs when a decision causes cost or benefit to _______ other than the person making the decision.

A

Stockholders

13
Q

What are the two types of Externalities

A

External Diseconomies of production or consumption

External Economies of production or consumption

14
Q

These are uncompensated costs imposed by a firm or an individual on other firms or individuals based on their actions.

A

External Diseconomies of Production or Consumption

15
Q

These are uncompensated benefits conferred to firms or individuals by the action of one firm or individual.

A

External Economies of Production or Consumption

16
Q

It is a by-product in producing goods and services that we consume

A

Pollution

17
Q

He was the first economist to develop the theory of public goods

A

Paul A. Samuelson

18
Q

Paul A. Samuelson defined the term public good as

A

Collective Consumption Good

19
Q

These are commodities, the consumption of which has to be decided by society as a whole, rather than each individual.

A

Public Goods

20
Q

The three characteristics of Public Goods

A

Non-Rivalrous consumption
Non-excludable
Non-Rejectable

21
Q

The consumption of one individual will not deprive others in consuming them

A

Non-Rivalrous Consumption

22
Q

If one individual consumes them, it is impossible to restrict others to do the same

A

Non-excludable

23
Q

Individuals cannot abstain from their consumption even if they wanted to.

A

Non-Rejectable

24
Q

Examples of Public Goods (3)

A

National Defense
Public Health Services
National Weather Services

25
Q

Solutions to Market Failure

A

Establishing of Property Rights
Imposing of Taxes and subsidies
Direct Regulation

26
Q

This is a legally established title to the ownership and use of resources, goods, or services.

A

Property Right

27
Q

Costs that are used to achieve and maintain property rights

A

Transaction Costs

28
Q

The use of taxes to bring private and social costs of production into agreement is known as

A

Pigovian Taxation

29
Q

A tax levied to correct the negative externalities of a market activity.

A

Pigovian Tax

30
Q

Taxes imposed on alcohol and cigarettes

A

Sin Tax

31
Q

Is a legalistic approach that usually involves the setting of standard to be complied with by polluters.

A

Regulation

32
Q

The inability of the unregulated market activity to provide desired goods and services at competitive prices.

A

Market Failure

33
Q

Two types of market imperfections that can cause market failures.

A

Structural and Incentive Problems.

34
Q

Caused by too few buyers and sellers

A

Structural Problems

35
Q

Caused by externalities

A

Incentive Problems

36
Q

Area associated with market failure when the firm utilizing these resources act in a manner that is contrary to the best interest of society.

A

Common Property Resources.

37
Q

In this form of incentive, firms or individuals are given the prerogative to limit the use of resources such as land, plant and equipment, and other assets or the practice of profession by other firms or individuals.

A

Property Rights Regulation

38
Q

This is granted by the government to promote valuable research and development in the health sector.

A

Patent.

39
Q

Another form of incentive designed to support desired economic activity.

A

Subsidy

40
Q

Are fined by the government to minimize the destruction of our resources such as air, water, and others.

A

Tax Policy

41
Q

Three groups in the economy that are affected by the cost of regulation.

A

Firms
Resource Owners
Consumers