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Economics Unit 1 > Market Failure > Flashcards

Market Failure Flashcards

0
Q

What is a negative externality

A

The social cost is greater than the private cost of the economic action

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1
Q

Define market failure

A

Beja

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2
Q

Define divergence

A

H

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3
Q

What is a positive externality

A

The social benefit is greater than the private benefit of an economic action

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4
Q

Define information failure

A

I

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5
Q

What is a merit good

A

Goods that have more private benefits than the consumer may actually recognise

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6
Q

What is a demerit good

A

A

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7
Q

What is a public good

A

A

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8
Q

Give an example of a merit good

A

The gym
Education
Library’s

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9
Q

Give an example of a demerit good

A

Mcdonalds

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10
Q

Give an example of a public good

A

Lighthouses, the army

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11
Q

Define state provision

A

S

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12
Q

What is an indirect tax?

A

S

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13
Q

What is a subsidy

A

Any form of government support, financial or otherwise, provided to producers or occasionally consumers in order to promote consumption of a good or service

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14
Q

Define regulation

A

Have

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15
Q

What is a pollution permit

A

I

16
Q

What is information failure

A

A

17
Q

How might the provision of information correct market failure?

A

Bs

18
Q

How might the over consumption of demerit goods and the under consumption of merit goods lead to market failure?

A

H

19
Q

What are the characteristics of a public good?

A

Non-excludability

Non-rivalry

20
Q

Why does the existence of public goods lead to market failure?

A

Uh

21
Q

Why do governments intervene to correct externalities?

A

H

22
Q

Why do governments intervene to influence the allocation of merit/demerit goods?

A

H

23
Q

Why do governments intervene to find public goods?

A

Y

24
Q

How do negative externalities arise as a result of the divergence between private and social costs?

A

U

25
Q

How do negative externalities lead to market failure?

A

U

26
Q

Give examples of a negative externality

A

Air pollution from road use
Litter/chewing gum
Housing development in green belt areas
Smokers ‘passive smoke’

27
Q

What is the welfare loss

A

The total loss to society caused by over consumption of a negative externality

28
Q

Give examples of positive externalities

A

Milk to school kids
Medical research
Restoration or use of old buildings

Economics Unit 1 (4 decks)

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