gov failure Flashcards
(11 cards)
1
Q
4 ways the market can fail
A
negative externalities
positive externalities
public goods
information gaps
2
Q
ways the government can intervene to solve these market failures
A
-taxes
-subsidies
-tradeable pollution permits
-maximum price
minimum prices
-regulation
-information provision
3
Q
minimum prices
A
increase price above equilibrium
4
Q
maximum prices
A
decreases the price of a good below equilibrium
-set below to stop prices rising back up to equilibrium
5
Q
gov failure examples
A
- distortion of price mechanism
-law of unintended consequences
-administration costs
-information gaps
6
Q
how to max price lead to gov failure
A
sets below equil, firms downgrade on quality as theres less incentive, people have lower living condition decreased standard of living - made worse therfore gf
7
Q
A
8
Q
A
9
Q
A
10
Q
A
11
Q
A
