Exam 1 Flashcards
Public policy
- Action and inaction
- “Government action or inaction to address social problems”
Example of public policy
Obama standing down on the Colorado weed legalization
Why public policy (and not private policy)
- There are a lot of social problems where fixing them does not generate profit
- Need government interaction
Market Failures definition
- A situation in which the government must get involved
- Where the allocation of goods and services are inefficient
4 types of market failures
- Monopolies
- Externalities/spillovers
- Informative failure
- Problem of “public goods”
Market failure: Describe monopolies
- One or several persons dominate the market
- Can control or manipulate the price of good
- Government must bust up corporations
Market failure: Describe Externalities
- (+/-)
- List positive and negative externalities
- Negative externality: 3rd party harmed by a transaction
- ex. Neighbor lets their yard go to shit and it lowers your property value
- Positive externality: 3rd party benefits from the transaction
- ex. business moves in, value of neighborhood goes up
Market failure: Describe Information failure/Information asymmetry
- When one party has more information than the other
- To have perfect competition, buyers and sellers must have full information
- But this is often not the case - sellers often times have more information than the buyers
Market failure: Describe Problem of “public good”
- The private market will not go near this because you cannot generate a profit
- Table!
Fill out the table for problem of public good
Fill out table for problem of public good
Rivalrous
I consume it, you cannot
Excludable
I can stop you from using it
Example of common pool resource
Study space on the quad
Example of private good
ISU coffee mug - walk into a store and buy it
Example of public good
public lecture in the one student center/telecast