Chapter 38 - Government policies to achieve efficient resource allocation and correct market failure Flashcards
Interventions
1) Specific and Ad valorem tax
2) Subsidies
3) Regulations
4) Pollution Permits
5) Property Rights
6) Provision of information
Negative Production Externalities
1) Specific & AD valorem indirect taxes
2) Regulations
3) Property Rights Pollution permits
4) Property Rights
5) Pollution Permits
Regulations
A wide range of legal and other restrictions that come from government or regulatory bodies.
Property Rights
Where owners have a fight to decide how their assets may be used.
Pollution Permits
A form of license given by governments that allows a firm to pollute up to a given level.
Negative consumption externalities
1) Specific Indirect Taxes
2) Price Controls
3) Provision of information
4) Production Quotas
Provision Of Information
When governments directly provide information to correct market failure.
Production Quota
A physical limit on what can be produced.
Positive Production Externalities
Subsidies and provision of information.
Positive Consumption Externalities
Direct provision and subsidies
Nudge Theory
Influencing choice by ‘ nudging ‘ individuals towards making more effective decisions.
The role of government and issues of equality and Equity
Effective government intervention can produce not only a more efficient allocation of resources but can, by correcting marker failure, result in greater social equality and equity.
Nationalization
When a government takes over a private sector business and transfers it to state ownership.
Government Failure
Where government intervention to correct market failure leads to a net loss of economic welfare.
Causes and consequences of government failure
- Imperfect information
- Unintended Consequences
- Policy Conflict