Chapter 4 Flashcards
what is the optimal mix of output?
most desirable combination of output with existing resources, technology, and social values
what is market mechanism?
use of market prices and sales to signal desired outputs
what is market failure?
imperfection in market mechanism that prevents optimal outcomes
what causes market failure?
the supply and demand haven’t led to best point on production curve
when is government intervention appropriate?
only when it improves market outcome
what is a public good?
good or service for anyone that doesn’t exclude anyone from consumption
what is a private good?
good or service for one person that excludes consumption by others
what is a free rider problem?
someone who benefits from another’s purchase/ consumption of a public good
what are the 4 types of market failure?
public goods, market power, inequity, and externalities
what is an example of externalities?
a free rider
what is social demand equal to?
the demand for a popular good or service
what is a natural Monopoly?
one firm supply an entire market
what does market power refer to?
ability to alter market price of good or service
what is a merit good?
everyone has a minimum of this good or service
what is the federal income tax?
progressive tax if your income is higher you pay more taxes
