Ch 11 - Government and Public Sector: Market Failure, Externalities, Public Goods, Efficiency

spillover benefit

A(n) ________ occurs here to individuals who are neither consumers nor producers of a product yet are responsible for costs.

negative externality

When a market experiences a(n) ________, it tends to be producing more a good than is socially desirable.

gini coefficient

can be used to calculate inequality.

Overproduction

Can be represented on the graph by the difference between Q2 and Q1.

MSC

The quantity produced when ________ is greater than MPC by the market, which implies that there is overproduction in the market.

Lorenz Curve

The graph for income inequality is called ________.

Taxation

is a form of government intervention which is set by the government to reduce income inequality.

Externalities

the costs or benefits that affect people ot involved in the production or consumption of a good.

Education

is an example of positive externalities, therefore, if the market were left alone, it will have a greater marginal social benefit than marginal private benefit at the market quantity of production.

Positive externalities

A market with ________ occurs when benefit travels to a third party.

Private good

are goods which have rivals in consumption and have exclusion.

portion of sales tax

A(n) ________ tends to be a greater burden on low income earners, which is what makes this tax regressive.

Market failure

to provide an efficient allocation of resources, and there can be a role for government to intervene and attempt to promote a more desirable social outcome.

Gini coefficient

A(n) ________ closer to 0 would mean that there is less income inequality, while a number closer to 1 would mean more inequality.

positive externalities

Subsidized goods and benefits will lead to a(n) ________ which creates spillover benefits.

Market failure

when a market fails to provide an efficient allocation of resources, and there can be a role for government to intervene and attempt to promote a more desirable social outcome

Externalities

the costs or benefits that affect people ot involved in the production or consumption of a good

Private good

are goods which have rivals in consumption and have exclusion

Public good

goods which are non-exclusive and non-rivals

Progressive tax

results in higher tax rates as income increases

Proportional Tax

applies the same tax on everyone regardless of their income

Regressive Tax

the average tax burden decreases as percent of income rises

Per-Unit Subsidy

a payment to producers from the government for each additional unit produced; a solution for positive externalities

Per-Unit Tax

a tax on producers for each additional unit produced, adding to the marginal cost of production; a solution for negative externalities