1 - What is Public Economics?

Question 1

When should the government intervene?

Answer 1

Question 2

First Fundamental Theorem of Welfare Economics

Answer 2

Private market outcomes are Pareto-efficient under a broad set of conditions

Question 3

Second Fundamental Theorem of Welfare Economics

Answer 3

Any Pareto-efficient allocation can be achieved through a decentralized equilibrium after redistribution, under a broad set of conditions

Question 4

Pareto Efficiency

Answer 4

No one can be made better off without making someone else worse off

Question 5

What motivates government intervention?

Answer 5

Question 6

Explain why markets only exist when there are established property rights and enforce contracts?

Answer 6

Question 7

Explain market failure

Answer 7

Question 8

Main sources of market failure

Answer 8

Question 9

Explain:

1) Limited rationality
2) Paternalistic responses to limited rationality

Answer 9

Question 10

Explain Equity-Efficiency trade-off

Answer 10

Question 11

Explain when is redistribution non-distortionary

and what happens in practice?

Answer 11

Question 12

How should the government intervene?

Answer 12

Question 13

How do we set a social objective?

Answer 13

Question 14

Explain the fundamental conflict between social and individual choice

Answer 14

Question 15

What are the effects of government intervention?

Answer 15

Question 16

Explain:

1) Theoretical toolkit to understand the interaction between policies and behaviours
2) Empirical methods for estimating behavioral responses

Answer 16

Question 17

Why does the government not pursue the optimal set of policies?

Answer 17

Question 18

Explain government failures

Answer 18