It is important for you to understand the arguments for and against government intervention in an otherwise competitive market. You will examine the conditions for economic efficiency, using the marginal social benefit and marginal social cost principle, and the ways in which externalities, public goods, and the market distribution of income create market failures even in perfectly competitive economies. In addition, you are expected to study the effectiveness of government policies such as subsidies, taxes, quantity controls, and public provision of goods and services, which are designed to correct market failures and achieve economic efficiency. It is also important both to emphasize that monopolies can cause market failures when they use their market power to engage in behavior that restrains competition and to examine the government's attempt to solve such problems by using antitrust policy and regulations. Although there is not a generally accepted standard for judging the equity of an economy's income distribution, this course will incorporate key measures of income distribution (Lorenz curve and Gini coefficient) and examine the impact of government tax policies and transfer programs, both on the distribution of income and on economic efficiency
The Essential Questions
- List the economic functions of government
- Define a public good
- Discuss the free rider problem
- List the effect of income and payroll taxes on the economy
- Identify the two principles used to assess fairness and efficiency of a tax
- Explain negative and positive externalities and give examples of each
- Identify the possible remedies for market failures that might be employed to achieve an optimal allocation of resources
- Define and list types of information failures.
Lessons
6.1-_market_failures_and_public_goods.ppt | |
File Size: | 2988 kb |
File Type: | ppt |
6.2-_externalities.ppt | |
File Size: | 4121 kb |
File Type: | ppt |
6.3-_antitrust_laws.ppt | |
File Size: | 281 kb |
File Type: | ppt |
6.4-_distribution_of_income_and_types_of_taxes.ppt | |
File Size: | 4390 kb |
File Type: | ppt |