PPT-Market Failure and the Role of Government

Sample Questions Mr Bordelon AP Economics Which of the following is an example of an activity generating a negative externality You buy a new car and then discover it needs a new transmission. AS Economics Unit 1. Aims and Objectives. Aim:. Understand government failure. Objectives:. Define government failure. Assess different forms of government failure. Starter. How can government intervention, cause government failure?. Sample Questions. Mr. Bordelon. AP Economics. Which of the following is an example of an activity generating a negative externality?. You buy a new car, and then discover it needs a new transmission.. Externalities. Essential Questions. Why are markets inefficient in the presence of positive and negative externalities?. How do we identify the area of efficiency loss (deadweight loss) when externalities are present?. Inadequate Competition. Mergers have resulted in fewer and larger firms. This can be good but can also decrease competition, which has consequences. Inadequate resource allocation – Why would a company with no competitors have an incentive to use fewer resources? They wouldn’t! With monopolies, the government steps in and regulates utilities like electricity.. A market failure is a situation where free markets fail to allocate resources efficiently. Economists identify the following cases of market failure:. Productive and . allocative. inefficiency. Markets may fail to produce and allocate scarce resources in the most efficient way. What have been the subsequent . effects of this . legislation?. http://en.wikipedia.org/wiki/Dangerous_Dogs_Act_1991. Government Failure. Government intervention in markets leads to economic inefficiency and . Section 2.4 Equity . in the distribution of income. 1. Define . community surplus, social efficiency, and Pareto optimality. Explain that the best allocation of resources from society’s point of view is at competitive market equilibrium, where . danger to . society from the increased ownership of dangerous dogs such as Pit . Bull Terriers. . . What have been the subsequent . effects of this . legislation?. http://. en.wikipedia.org/wiki/Dangerous_Dogs_Act_1991. Conflicts in Yellowstone . Public Choice: A Public Decision Making Process. The trade-off between tourism and environmental protection that shaped the historic landscape remains important for the politics of the Yellowstone region. . A Closer Look at . Economic Efficiency. What is Economic Efficiency?. Economists use the concept of . efficiency . to judge actions because efficient use of resources implies the maximum value of output from the resource base. SSEF5. Overview. Government has an active role in establishing a framework or rules of the game in economic life. . In the United States, this activity involves:. Preserving and fostering competition. Scarcity – The . basic economic problem that arises because people have unlimited wants but resources are limited. The government can protect a free market economy by maintaining a stable currency, tax breaks to proprietorships, law and order…. PPA . 670. Policy Issue Analysis. Dr. Butz. Economic Freedom. Economic . freedom (from an economic efficiency standpoint) . refers to the degree to which private individuals are able to carry out voluntary exchange without government involvement. The foundation of the theory of coordination failure is the idea that the market may fail to achieve coordination among complementary activities. When complementarians exist, that is when returns of one investment depend on the presence or extent of other investments, there exist two scenarios..