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Microeconomics > sdsda > Flashcards

sdsda Flashcards

1
Q

What are evaluation points on taxes?

A

Politically unpopular
Black market
Effectiveness of those with an inelastic demand curve is limited
Near impossible to quantify the MEC
Cost of implementing enforcing
Needs to have effective consequences
Inequality

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2
Q

What does government failure result in

A

A net welfare loss to society

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2
Q

What is a minimum price?

A

a price floor below which the price of a good or a service is not allowed to decrease.

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2
Q

What are the negatives of monopolys?

A

There is a loss of welfare (consumer surplus falls)
Can worsen inequalities
Competition is generally accepted as desirable

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3
Q

What are some benefits of monopolies?

A

Economies of scale, international competitiveness

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3
Q

What is indirect tax?

A

tax imposed on producers (suppliers) by the government

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3
Q

What is the evaluation of price floors?

A

Creates a surplus
“dumping” may occur
Inelastic PED
Costly for government to enforce, monitor
To be effective, the pmin must be above the market clearing price

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3
Q

What is partial market failure?

A

It is where a market exists but contributes to recourse misallocation

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4
Q

When in the incidence of tax high?

A

When most of the tax is added to the consumer
When demand is price inelastic

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4
Q

What is occupational immobility of labour?

A

As patterns of demand and employment change, many workers may find it difficult to secure new jobs, since they lack the necessary skills

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4
Q

What does complete market failure result in?

A

A missing market (street lights national park)

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4
Q

What is a merit good?

A

A good that would be under-consumed in a free market, as individuals do not fully percieve the benefits obtained from consumption

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5
Q

What is marginal private cost?

A

The cost to an individual or firm of an economic transaction

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6
Q

What are the 7 main causes of recource misallocation?

A

Positive and negative externalities
Merit and demerit good
Public goods
Monopoly and market imperfection
inequalities in the distribution of income and wealth
factor immobility causing unemployment
imperfect informations

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7
Q

What is a quasi-public good?

A

a good that has some of the qualities of a public good but does not fully possess the three required characteristics of non-rivalry, non-excludability and non-rejectability.

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8
Q

What are negative externalities?

A

a negative spillover effect to third parties of a market transaction; social costs exceed private costs.

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9
Q

What do merit goods usually generate

A

Positive externalities

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9
Q

What usually happens to merit goods?

A

Usually subsidised and funded by governments

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10
Q

What is a monopoly?

A

A market structure dominated by a single seller of a good

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10
Q

Why are subsidies on producers politically unpopular?

A

Money could be spent elsewhere, especially if it is a higher profit making firm, might lead to high taxes

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11
Q

What is marginal social benefit?

A

the full benefit of an economic transaction, including private and external benefits

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11
Q

What are externalities?

A

Costs or benefits that spillover to third parties to a market transaction

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12
Q

What are positive externalities?

A

a positive spillover effect to third parties of a market transaction; social benefits exceed private benefits.

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13
Q

Where does welfare loss point to?

A

The social optimum

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14
Q

What is a subsidy?

A

A subsidy is any form of government support (financial) offered to producers and consumers

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15
Q

What is the total amount of the subsidy per good for producers on a subsidy graph?

A

P1P2QSO

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16
Q

What are the two immobilitys of factors of production?

A

Occupational immobility of labour
Geographical immobility of labour

17
Q

What is direct tax?

A

Tax on income

18
Q

What is asymetric information?

A

The supplier knows more information than the consumer usually

18
Q

What is income?

A

Money from a job

18
Q

What is wealth?

A

Wealth is owned assets

18
Q

What is a public good?

A

A good that posseses the characteristics of non-excludability, non-rivalry in consumption and is non-rejectable.

19
Q

What is a price ceiling?

A

the maximum amount a seller can charge for a good or service

20
Q

What is a pure monopoly?

A

Where only one firm supplies the market

21
Q

What is the incidence of tax?

A

The proportion of tax passed onto the consumer

21
Q

What do monopolys do

A

Restrict supply and raise the price

22
Q

What are the two types of taxes

A

Direct and indirect tax

23
Q

What is dumping?

A

Selling at a low price to developing countries,

24
Q

What is marginal external cost?

A

The spillover cost to third parties of an economic transaction

24
Q

What does non-excludability mean?

A

once provided, no person can be excluded from benefitting

25
Q

What is marginal social cost?

A

The full cost to society of an economic transaction, including private and external costs.

26
Q

What is MSC

A

MPC + MEC

26
Q

What is marginal private benefit?

A

The benefit to an individual or a firm of an economic transaction

27
Q

What are the causes of government failure?

A

Imperfect information
Conflicting objectives
Caused by political self interest
Disincentives
Policy myopia

28
Q

What is geographical immobility of labour?

A

Where workers find it difficult to move to where employment opportunities may be, due to family ties and differences in housing costs.

28
Q

What does non-rivalry mean?

A

consumption of the good by one person does not reduce the amount of available for consumption by another person

28
Q

What are non-payers?

A

non payers can enjoy the benefits of consumption at no financial cost to them
known as free riders.

28
Q

What are free-riders?

A

A person or organisation which recieves benefits that others have paid for without making any contribution themselves

29
Q

What is a missing market?

A

A situation in which there is no market because the functions of price have broken down.

29
Q

What is excess supply?

A

When the quantity supplied at a particular price is greater than quantity demanded, there is disequilibrium

29
Q

Why is subsidising the producer encouraging inefficiency?

A

Firms may now lack the incentive to keep costs low

30
Q

What is welfare loss?

A

Net welfare loss is the lost welfare as a result of too much or too little production and consumption of a good or resource.

30
Q

When is welfare gained?

A

When the output is at socially optimum level

30
Q

What does non-rejectable mean?

A

if a public good is provided, we cannot avoid it

31
Q

What is marginal external benefit?

A

The spillover benefit to third parties of an economic transaction

32
Q

What is MSB?

A

MPB + MPC

33
Q

When is welfare lost?

A

When the output is at free market level. Because there is under consumption

33
Q

What is the evaluation on subsidies for producers?

A

Costly for the government to implement (opportunity cost)
Effectiveness is limited arguably on those with inelastic PED
Difficulty quantifying externality
Politically unpopular
Encourages inefficiency

34
Q

What is the evaluation for subsidising consumers?

A

Politically unpopular/ popular depending on if you get the subsidy
PES (short vs long run)
Difficult to calculate the MEB
Raise price of the good

35
Q

What is the problem with state provision?

A

its expensive. Opportunity costs. Pressures on the govt budget. places burden on taxes, already taxes. conflictting objectives

36
Q

What is government failure

A

When government intervention to correct market failure does not improve the allocation of recources or leads to worsening of the situation

37
Q

What is policy myopia?

A

WHen politicians look for short term solutions to difficult economic problems rather than making considered analysis of long term considerations

38
Q

What are the causes of government failure? 2

A

Imperfect information
Administrative costs
Unintended consequences

39
Q

Why is inequality a market failure?

A

Opportunity cost of benefits
Negative externality arising from homelessness and poverty
Policing
Lower income earners pay less tax, use more in terms of government services

39
Q

When does market failure occur?

A

Market failure occurs when the free market, left alone, fails to deliver an efficient allocation of recources

39
Q

What is administrative costs?

A

Where the costs exceed benefits gained
Value for money

Microeconomics (7 decks)

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