Content Flashcards

Question

indirect taxes to solve mf + -

Answer 1

+ solves mf - pid=no q change imperfect info (if too high bm, firms shut down, move abroad) regressive paternalistic

Answer 2

redundancy costs penalties to leave contracts early sunk costs undervaluation of assets

Answer 3

higher quality w better equipment increase/decreases barriers to entry increases contestability (more info, bigger pool of potential entrants, lowers barriers) monopoly power for 1st firm to utilise increases labour productivity + efficiency increases eos

Answer 4

labour is not homogenous (diff mrps, s, discrimination) non monetary characteristics (pc assumes only w influences decisions - higher w to compensate for bad working conditions) labour is not perfectly mobile (+imperfect info) tus (w higher than market eqm) monopsonies (w lower than market eqm)

Answer 5

+ incentives to increase work and start businesses to increase y trickle down effect ae - poverty can remain high only high y/wealth can afford to take risks as entrepreneurs more crime and lower health and education wealth asset bubbles and property speculation more wealth means more income (rent dividends interest) income restricts economic growth as no income means no c so no ad

Answer 6

+ more tr for gov lowers inequality targets windfalls increasing equity can promote efficient reallocation of wealth - laffer curve arguments (discourages I, y generating activity and growth, emigration, tax loopholes) admin challenges eval rate (higher=more negatives) assets chosen enforcement

Answer 7

+ ae (consumers decide what is and isn't produced no cost or regulation needed p kept to min - inequality likely public goods merit and demerit goods

Answer 8

+ reducing costs of production ... welfare gain increases affordability - high gov + opp costs imperfect info how each firm will use sub (dependance, inefficiencies, deleverage, high w/dividends) - will not reduce costs pid = no change in q

Answer 9

independant ceteris paribus pc markets

Answer 10

dont know mc/mr key stakeholders harmed (workers, environmental groups) + greater scrutiny from stakeholders = profit satisficing other objectives + not-for-profit firms profit max lr and need other goals sr (eg increase brand loyalty + awareness)

Answer 11

f move in and out of labour force (children = reduces skills and experience so lowers mrp) age of economic inactivity education + qualifications (in developing) f work in low paid jobs (part time, service, vocational, public) high s of f in developed discrimination

Answer 12

footballers have higher mrp high d and low s and inelastic (takes long time to get good enough) monopsonist state employer of teachers vocational element to teaching reluctance of teachers to strike limiting tu power

Answer 13

restructuring of uk economy towards services (london) - multiplier effect (low w = people spend less = labour is derived d) - accelerator effect (low I in N) structural immobility in N oly best workers in N move S exacerbating problem

Answer 14

p making power prevent market seepage must have info to differentiate between diff groups of people w diff peds

Answer 15

minority groups have lower mrps lack of language proficiency (esp in high w professions) conc of minority workers in low w professions discrimination

Answer 16

+ E fficiency (pe, ae, de - only best products have high d) P roductivity (to reduce costs) I ncentives (to produce g/s consumers want) C omp (more choice and higher quality) more jobs and economic growth - monopolies no public goods merit + demerit goods unethical cost cutting lower eos more inequality creative destruction

Answer 17

+ natural monopolies DE stable employment cross subsidisation high eos may reduce p (lower mc means lower p than pc) - complacency dos XI as no need to increase efficiency PI as mc≠ac AI as MC≠P lower choice supplier exploitation due to monopsony power inequalities in necessity markets for low y people eval de vs high w/dividends/deleverage type of good/service (luxury=good + necessity=bad) eos vs dos = depends on size objective (can be welfare max) regulation (prevents inefficiencies) p discrimination (increases inequality) competition and contestability + threat of natural monopoly

Answer 18

+ de high eos may reduce p some consumers benefit w lower p (elastic in 3rd and high q in 2nd) cross subsidisation of loss making services y redistribution manages d preventing overcrowding (eg airlines at unpopular times) - ai (p>mc) inequality (lower cs) and inequity (those charged higher p not necessarily richest) admin costs to find diff segments reputation risks

Answer 19

increase eos principle agent problem limit pricing (@break even deterring comp) increase market share + therefore monopoly power flood the market = increase brand recognition easier to get loans

Answer 20

increase eos principle agent problem increase market share + therefore monopoly power

Answer 21

+ more equity as more affordability increase consumption of merit goods - shortages due to xs d (bm) low p may = low quality imperfect info enforcement costs high cost to produce own s/subsidise if gov not happy w xs d

Answer 22

+ reduce q to p*q* for demerit if intervention buying guarantees min y protects producers from p volatility - if pid q wont decrease enough to solve mf regressive bm imperfect info high costs + AI if intervention buying

Answer 23

+ reduce poverty reduce w differentials work over welfare reduce benefits spending increase productivity w morale boost - higher u cost to businesses (shutting down + lack of international competitiveness) youth lose out the most those not on nmw may ask to increase w to maintain differential poorest not in work so may not reduce poverty

Answer 24

prevents high p in high conc markets increase comp increase quality, standards and choice regulates natural monopolies ensures effective privatisation ensures proper reinvestment of sn profits

Answer 25

derived d (complements) competitive d (substitutes) derived d (input d) composite d (same input to make >1 output) joint s (2nd good is byproduct of 1st)

Answer 26

+ incentive to increase skills/qualifications/training to get higher paid jobs - increases productivity reducing costs increasing comp trickle down effect increases enterprise encourages work not welfare promotes ae (w signals most suitable profession) - y inequality less growth as poor have highest mpc trickle down effect may not happen eval how much inequality risk of gov failure sr - w lr +

Answer 27

+ and - externalities (self interest - profit or u max) merit and demerit goods (info failure) public goods (free rider problem + profit max) tragedy of the commons (CAR - self interest) y inequality monopoly power factor immobility

Answer 28

info failure (correctly valuing externalities) admin and enforcement costs unintended consequences (bm, impact on poor and firms, dependance, perverse incentives) regulatory capture political interference + consistency moral hazard (banks + public sector)

Answer 29

soft drinks industry uk supermarkets smartphones global cars (Toyota, Honda, Volkswagen , and Renault-Nissan-Mitsubishi.) entertainment (Universal Music Group, Sony, and Warner)

Answer 30

internet water gas electric

Answer 31

+ solves missing mf increases consumption of merit goods increases equity reduces inequality as redistributes y - low efficiency as no profit motive high costs always xs d (pay w pain, waiting times, poor quality) imperfect info (correct s)

Answer 32

generally makes efficient markets worse if monopsony labour market can increase w and employment closer to pc outcomes (more monopsony power = more benefit) strength of tu (union density - lower=less distortion) union markup (higher=more success)

Answer 33

figures are only estimates assume d+s are independent, ceteris paribus, pc markets ped varies along the d curve

Answer 34

industries w high fc competition results in a wasteful duplication of resources and a non exploitation of full eos

Answer 35

low barriers large pool of potential entrants good info incumbent firms subject to hit and run comp high sn profits can be made

Answer 36

+ Max welfare (public and merit goods) Low unemployment Prevent monopolies - Poor decision making (info failure) Low choice Low efficiency Low risk taking (no profit motive)

Answer 37

R and d is risky All firms make n profit No reward for risk

Answer 38

+ Inventive not to exploit car Reduce q to p*q* Money raised can reduce effects (internalise externality) - Enforcement costs Equity (who gets rights) Can affect >1 country Difficult extending (air and sea) Difficult putting value on property Difficulty tracing source of environmental damage

Answer 39

Firm employs workers who are less productive as less qualified Training may improve productivity but poaching

Answer 40

Ped = producers gain more low gov rev Pid = consumers gain more high gov rev Pes = high cb low pb Pis = low cb high pb

Answer 41

Pid = consumers gain more Ped = producers gain more

Answer 42

+ Xe ae de Cs gain reducing p Rev from selling firms - Lower focus on quality and service and onto profits and costs Privatised public monopoly could become private monopoly Limited comp immediately (firms may not flock to the industry) Loss making services can be cut even if socially desirable Loss of natural monopoly and eos Eval Level of comp post privatisation Level of gov regulation (monopoly/oligopoly force socially desirable force higher or lower q for externalities

Answer 43

+ more I more jobs more spending more tax revenue - may spend on M may save may move money abroad

Answer 44

productivity indirect tax no of firms tech subsidy weather costs of production