Market Failure, Government Intervention, Privatisation

Question 1

Competition policy

Answer 1

Government intervention that reduces monopoly power and introduces competition to reduce consumer exploitation

Question 2

Complete market failure

Answer 2

Occurs when there is a market missing

Question 3

Consumption externality

Answer 3

An externality generated through consumption of a good or service

Question 4

Demerit good

Answer 4

Goods where the social costs in consumption exceed the private costs in consumption

Question 5

Deregulate

Answer 5

Reduce amount an industry is regulated

Question 6

Externality

Answer 6

External effects imposed on society derived from the production or consumption of a good or service

Question 7

Geographical immobility of labour

Answer 7

Difficulty or inability of workers to move form one location to another to find employment

Question 8

Government failure

Answer 8

Where government intervention leads to a lessening of economic welfare and a misallocation of resources

Question 9

Government intervention

Answer 9

When a government actively intervenes and affects market operation

Question 10

Immobility of factors of production

Answer 10

When it is hard for factors of production to move across different areas within the economy

Question 11

Immobility of labour

Answer 11

The inability of labour to move from one occupation to another. There are two main types, geographical and occupational

Question 12

Imperfect information

Answer 12

When an economic agent does not hold all the necessary information to make an informed decision about a product

Question 13

Income inequality

Answer 13

Differences in size of earnings between households/ individuals

Question 14

Market failure

Answer 14

Misallocation of resources where resources are either over allocated or under allocated.

Question 15

Nationalise

Answer 15

Convert from private ownership to public (government) ownership

Question 16

Negative externality

Answer 16

Negative external effects imposed in society derived from the production or consumption of a good or service

Question 17

Non-excludable

Answer 17

A good or service where you are unable to prevent non-paying customers from benefitting or using the good

Question 18

Non-rival

Answer 18

Where one person’s consumption of a good or service does not decrease the amount of available for consumption by another consumer

Question 19

Occupational immobility of labour

Answer 19

Workers find it difficult to transfer between different occupations due to a lack of transferable skills

Question 20

Outsourcing

Answer 20

When a private sector firm bids to offer a public service

Question 21

Positive externality

Answer 21

Positive external effects imposed on society derived from the production or consumption of a good or service

Question 22

Price ceiling

Answer 22

A price above which trade is illegal

Question 23

Price controls

Answer 23

Government controls prices (minimum and maximum)

Question 24

Price floor

Answer 24

A price which below trade is illegal

Question 25

Price mechanism

Answer 25

The way in which prices are determined through forces of supply and demand

Question 26

Private benefit

Answer 26

Benefits incurred to the individual through consumption or production

Question 27

Private cost

Answer 27

Costs incurred to the individual through consumption or production

Question 28

Private good

Answer 28

An excludable, rival good

Question 29

Privatise

Answer 29

Convert from public ownership to private ownership

Question 30

Production externality

Answer 30

An externality generated through production of a good or service

Question 31

Productivity gap

Answer 31

Difference between productivity of UK labour and other countries labour

Question 32

Public good

Answer 32

Non-excludable, non-rival good

Question 33

Quasi-public good

Answer 33

A good that has characteristics of both public and private goods

Question 34

Rationing

Answer 34

Limiting the amount or quantity of a good

Question 35

Regulation

Answer 35

Imposing policies, rules, laws, constraints etc

Question 36

Regulatory capture

Answer 36

Regulatory bodies become dominated by the industries in which they were regulating, leading to a decrease in economic welfare

Question 37

Resource misallocation

Answer 37

Resources are allocated in a way that does not maximise economic welfare

Question 38

Social benefits

Answer 38

The sum of private benefits and external benefits

Question 39

Social cost

Answer 39

The sum of private costs and external costs

Question 40

State provision

Answer 40

Where the government provides a good or service

Question 41

Subsidy

Answer 41

Payment made by the government to incentivise production of a good

Question 42

Tax

Answer 42

Compulsory levy imposed by the government to de-incentivise production of a good

Question 43

Unintended consequences

Answer 43

When the cations of people or a government have consequences that were not anticipated

Question 44

Vouchers

Answer 44

Allowances to utilise goods or services at a discounted rate