Unit 6 - Market Failure and the Role of Government Guide

when someone uses a product, it decreases the benefit of others

when one uses a product, others benefit

measures the distribution of income equality (you want to be as close of possible to the perfect equality line as possible)

taxes are lower % on people earning a higher income (increases income inequality)

axes are higher % on people earning a higher income (reduces income inequality)

underproduced due to freeloader problem.

is when resources are allocated effectively.

works like taxes, they ensure competition /environmental protection /health and safety.

gives benefit no matter how many units.

people can enjoy the benefit of a good /service without paying.

everyone pays the same percentage of their income (no impact on income distribution)

if someone consumers a product, others can not.

gives benefits per unit.

becomes MR curve, price and output decreases.

non payers can be prevented from enjoying the benefits.

promote competition and prevents monopolies.

measures % of income that goes to individuals in different percentiles /brackets.

S=D, MB=MC

P=MC

exists when firms produce at MPC=MPC, S=D

when external cost/benefit is placed on members of society who did not pay for them

when someone uses a product, it decreases the benefit of others (ex

when one uses a product, others benefit  (ex

if someone consumers a product, others cannot

food, shoes, etc

national defense, fireworks, etc

non payers can be prevented from enjoying the benefits

food, school, etc

national defense, air, etc

underproduced due to freeloader problem

people can enjoy the benefit of a good/service without paying

goods produced by private markets, can be excludable

gives benefits per unit

MC, ATC, AVC decreases, price doesnt change (price taker)

MC, ATC, price decreases (price maker @ MR=MC)

gives benefit no matter how many units

increase MC, ATC, and AVC

MC, ATC, AVC increases, price doesnt change (price taker)

MC, ATC, price increases (price maker @ MR=MC)

only increase ATC

works like taxes, they ensure competition/environmental protection/health and safety

promote competition and prevents monopolies

sets minimum price

causes shortage

becomes MR curve, price and output decreases

sets maximum price

leads to surplus

wages go up and workers go up

measures % of income that goes to individuals in different percentiles/brackets

everyone would receive equal shares of income

wages, rent, interest, profit

measures the distribution of income equality  (you want to be as close of possible to the perfect equality line as possible)

everyone pays the same percentage of their income (no impact on income distribution)

taxes are higher % on people earning a higher income (reduces income inequality)

taxes are lower % on people earning a higher income (increases income inequality)