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Public Goods

ExternalitiesUnfair

DistributionOf income

Resource Market

Market Failures

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Monopolies

What makes public goods market failures?

A.Incentive to provide public goods by the public sector

B.The government is inefficient and cannot provide public goods

C.Free rider problemD.Businesses are making too much profit

from the consumer demand that they are not meeting.

C. Free rider problemThe private sector does not

have any incentive to produce these goods since the free-rider

problem makes these goods unprofitable.

What are free riders?

Free riders are people who benefit from a public good

without paying for it.

Who produces public goods and

why?

The government produces public goods because if the production of these goods was left to just the private

sector, there would be underproduction since

there is a lack of incentive.

What are the two characteristics of a public

good? Give an example of a public good.

A public good is defined by nonexcludability and nonrivalry (shared

consumption).Examples include: national defense, streets, parks, the

ocean

What concept of public goods does this picture represent?

This represents the common pool problem.

When a good is offered to all in the public, there is no incentive to pay for or

maintain that good.

What type of externality has MSC above the free

market equilibrium?

Negative

What are the two ways that a government can

remedy a positive externality?

The government can give a subsidy to the consumers or to the

producers, thus increasing quantity to the socially optimal

level.

A paper making factory pollutes the lake it is next to. To correct this the government does what? Graph this externality and decide how to correct this problem.

TEAM TASK

A per unit tax On producers

When a product has a positive externality, its quantity in the free market creates a _____.

A.SurplusB.ShortageC.Lower demandD.Greater supply

B. SHORTAGE

What does the free market fail to take into account,

thus resulting in a market failure?

EXTERNALITIESSNEAKY

Why are monopolies considered a market

failure?

They are not productively or allocatively efficient

and there is no competition in the free

market.

What is the purpose of

antitrust policies?

To prevent monopolization, promote competition, and achieve allocative

efficiency

1. Allocative Efficiency 2. Imperfect competition3. Marginal Cost4. Productive Efficiency5. Barriers to Entry

PasswordChoose two players and one referee.

Why is taxing a monopoly a bad

idea?

Taxing raises the MC curve and lowers the quantity produced.

Identify and define the three types of mergers

Horizontal merger between firms with similar products, vertical merger between firms with a buyer-seller relationship, and conglomerate merger between

firms of different industries

The Lorenz Curve demonstrates what?

A. Income Inequality

B. Tax rates and returns

C. Government efficiency

D. Monopoly profit

A. Income inequality

Economists today agree that US is currently operating at what point in the Laffer Curve?

A. At point MB. Above Point MC. Below Point MD. At zeroE. At 100

C. Below Point M

What is the Gini Ratio in respect to “A” and “B”?

____A______A+B

Describe the 3 different types of taxes and identify which one of them

reduces income inequality.

A progressive tax (reduce inequality) takes a higher percentage of income from high income groups.

A proportional tax takes the same percent of income from every income group.

A regressive tax takes a higher percentage of income from low income groups.

When supply is inelastic and demand is elastic, who pays

more of the tax?When supply is elastic and

demand is inelastic, who pays more of the tax?

What if demand is perfectly elastic?

ProducerConsumerConsumer

What is the curve that shows the relationship

between tax rate and tax revenue?

Laffer Curve

The sriracha company produced the sriracha sauce without realizing that the foul smell was disturbing the people living near the factory. What type of externality is this, which curve (demand or supply) will show this externality and how should the government react?

Negative externality that shifts the supply/MPC to the left (becomes MSC) & the government should tax

producers

The polo market accidentally became a monopoly and is making a profit. Draw and label a graph of a monopoly and explain why it is a market failure.

TEAM TASK

They are not productively or allocatively efficient. They charge too high and produce too little.

If a good creates a positive externality, what should the

government do (tax or subsidize) and who should it be placed on

(producers or consumers) so that the socially optimal price is the

lowest possible?

A subsidy on producers

Timed Task

Place the following items in a table to demonstrate which are pure public goods and pure private goods:

A. National defenseB. Street lightsC. Hair cutD. The Hudson RiverE. FishingF. Hot dogsG. FireworksH. Computers

Shared consumption Rivalry

Nonexclusion National defenseStreet lightFireworksHudson RiverFishing

Exclusion Hot dogHaircutComputers

How long was Kim Kardashian married to Kris

Humphries?

72 DAYS!!!

Who won the Oscar for the best song of 2014?

Pharrell William for “Happy”

The three starters from Pokemon’s first generation are?

Bulbasaur, Charmander, and

Squirtle

What movie is this from?

Daily DoubleIf you get it correct, you can

take and additional 20 points from another team

Titanic

What is the maximum score

you can get on an AP test?