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PEDG > Chapter 2 Market Failure > Flashcards

Chapter 2 Market Failure Flashcards

0
Q

Market economy

A

An elaborate mechanism for coordinating people, activities, and businesses through system of prices and markets

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1
Q

Mixed economy

A

Combination of private enterprise working through the marketplace and government regulation, taxation, programs

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2
Q

Market

A

Actual place where buyers and sellers could engage in face to face bargaining

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3
Q

Market 2

A

Places where buyers and sellers interact, exchange goods and services or assets and determine prices

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4
Q

Market 3

A

Mechanism through which buyers and sellers interact to determine prices and exchange goods, services, and assets

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5
Q

Central role of markets

A

Determine the price of goods

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6
Q

Price

A

The value of the goods in terms of money

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7
Q

Price serves as

A

Signals to producers and consumers

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8
Q

Market equilibrium

A

Represents the balance among all the different buyers and sellers

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9
Q

One of the three economic problems

What

A

Determine by the daily purchase of the consumers

Firms are motivated by the desire to maximize profits

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10
Q

Profit

A

Net revenue or the difference between total sales and total costs

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11
Q

One of the three economic problems

How

A

Determine by the competition among different producers

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12
Q

One of the three economic problems

For whom

A

Who is consuming and how much

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13
Q

Factor prices

A

Wage rates
Land rents
Interest rates
Profits

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14
Q

Dual monarchy - rulers in a market economy

A

Taste

Technology

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15
Q

Consumers

A

Buy goods and sell factors of production

Use income from the sale of labor and other inputs to buy goods from businesses

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16
Q

Businesses

A

Sell goods and buy factors of production

Base their prices of goods on the costs of labor and property

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17
Q

Invisible hand

A

Private interest can lead to public gain when it takes place in a well functioning market mechanism

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18
Q

Market failures

A

Inefficiency
Inequality
Macroeconomic problems

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19
Q

Features of a modern economy

A

Elaborate network of trade depends on a specialization and division of labor

Extensive use of money used for measuring economic values and means for payment

Use of vast stocks of capitals

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20
Q

Specialization

A

Occurs when people and countries concentrate their efforts on a particular set of tasks

Best advantage to use the specific skills and resources available

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21
Q

Division of labor

A

Dividing production into a number of small specialized steps or tasks

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22
Q

Money

A

Means of payment in the form of currency and checks used to buy things

23
Q

Capital

A

Output serves as an input to produce another output

Machines
Buildings
Computers
Software

24
Q

Property rights

A

Bestow on their owners the ability to use exchange paint dig drill or exploit their capital goods

The ability of individuals to own and profit from capital is what gives capitalism its name

25
Q

How do governments perform their functions?

A

Governments operate by requiring people to pay taxes, obey regulations, and consume certain collective goods and services

26
Q

Governments have three main economic functions in a market economy

A

Increase efficiency by promoting competition and externalities like pollution and providing public goods

Promote equity by using tax and expenditure programs to redistribute income

Foster macroeconomic stability and growth reducing unemployment and inflation while encouraging economic growth

27
Q

Perfect competition

A

Technical term refers to a market in which no firm or consumer is large enough to affect the market price

28
Q

Imperfect competition

A

Occurs when a buyer or seller can affect a good’s price

29
Q

Monopolist

A

Single supplier who alone determines the price of a particular good or service

30
Q

Externalities

A

Occur when firms or people impose costs or benefits on others outside the marketplace

31
Q

Public goods

A

Commodities which can be enjoyed by everyone and from which no one can excluded

32
Q

Price vs tax

A

Price is voluntary

Tax is not voluntary. Everyone is obligated to pay for our share of the cost of public goods

33
Q

Government use to implement to reduce income inequality

A

Progressive taxation

Transfer payments

34
Q

Progressive taxation

A

Taxing large incomes at a higher rate than small incomes

35
Q

Transfer payment

A

Money payments to people include aid for the elderly

Provides a safety net to protect the unfortunate from privation

36
Q

Macroeconomic growth and stability

A

Fiscal policies

Monetary policy

37
Q

Fiscal policies

A

Power to tax and the power to spend

38
Q

Monetary policy

A

Involves determining the supply of money and interest rates

39
Q

Welfare state

A

One in which markets direct the detailed activities of day to day economic life while government regulates social conditions and provides pensions health care and other necessities for poor families

40
Q

Ineffiency

A

Monopoly
Externalities
Public goods

41
Q

Government intervention in Monopoly

A

Encourage competition

42
Q

Examples of government policy in Monopoly

A

Antitrust laws

Deregulation or opening of markets

43
Q

Examples of government policy in externalities

A

Antipollution laws

Antismoking ordinances

44
Q

Examples of government policy in Public goods

A

Provide public education

Build roads

45
Q

Inequality

A

Unacceptable inequalities of income and wealth

46
Q

Government intervention in Inequality

A

Redistribute income

47
Q

Examples of government policy in redistributing income

A 
Progressive taxation
Transfer payments (Pantawid Pamilyang Pilipino Program)
48
Q

Macroeconomic problems

A

Business cycles (inflation, recession)

Slow economic growth

49
Q

Government intervention in macroeconomic problems

A

Stabilize through macroeconomic policies

Stimulate growth

50
Q

Examples of government policy in Stabilizing macroeconomic policies

A

Monetary policies

Fiscal policies

51
Q

Examples of government policy in stimulate growth

A

Improve efficiency of tax system

Raise national savings rate by reducing budget deficit or increasing budget surplus

52
Q

Government intervention in externalities

A

Intervene in markets

53
Q

Government intervention in public goods

A

Encourage beneficial activities

54
Q

Key attributes of public goods

A

Nonrivalry

Nonexcludability

55
Q

Nonrivalry

A

The cost of extending the service to an additional person is zero

56
Q

Nonexcludability

A

Impossible to exclude individuals from enjoying it

PEDG (1 decks)

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