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Econ Ch11 Government

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Econ Ch11 Government

  1. 1. Chapter Government 11
  2. 2. Objectives: Students will learn <ul><li>The role the government plays in a market economy </li></ul><ul><li>The reasons for market failures </li></ul><ul><li>The results of market failures </li></ul><ul><li>The difference between public Goods and Bads </li></ul>
  3. 3. Making Rules <ul><li>The government is responsible for: </li></ul><ul><ul><li>Protecting Property </li></ul></ul><ul><ul><li>Maintaining Standards </li></ul></ul><ul><ul><li>Building Confidence </li></ul></ul>
  4. 4. Market Failures <ul><li>Caused by: </li></ul><ul><ul><li>Imperfect competition </li></ul></ul><ul><ul><ul><li>Unfair business practices </li></ul></ul></ul><ul><ul><ul><li>Monopolies </li></ul></ul></ul><ul><ul><ul><li>Price Discrimination </li></ul></ul></ul><ul><ul><ul><li>Wage Discrimination </li></ul></ul></ul><ul><ul><li>Market Externalities </li></ul></ul><ul><ul><ul><li>Negative externalities </li></ul></ul></ul><ul><li>Government Response </li></ul><ul><ul><ul><li>Laws </li></ul></ul></ul><ul><ul><ul><li>Taxes </li></ul></ul></ul><ul><ul><ul><li>Tax Credits </li></ul></ul></ul>
  5. 5. Imperfect Competition <ul><li>Unfair business practices </li></ul><ul><li>Monopolies-antitrust laws </li></ul><ul><li>Price discrimination </li></ul><ul><li>FTC </li></ul><ul><li>Cease and desist orders </li></ul><ul><li>Minimum wage laws </li></ul>
  6. 7. Externalities <ul><li>Externalities : social costs of actions </li></ul><ul><li>Can be negative or positive </li></ul><ul><li>Negative: </li></ul><ul><ul><li>Noise </li></ul></ul><ul><ul><li>Pollution </li></ul></ul><ul><ul><li>Others? </li></ul></ul><ul><li>Positive: </li></ul><ul><ul><li>Economic Benefits </li></ul></ul><ul><ul><li>Free </li></ul></ul>
  7. 8. Government Responses <ul><li>Laws: </li></ul><ul><ul><li>Antitrust Laws </li></ul></ul><ul><ul><li>Standards regulations </li></ul></ul><ul><ul><li>Bans </li></ul></ul><ul><li>Taxes </li></ul><ul><ul><li>Internalizing and Externality </li></ul></ul><ul><ul><li>Reduces consumer demand </li></ul></ul><ul><ul><li>Increases price of production </li></ul></ul><ul><li>Tax Credits </li></ul><ul><ul><li>Incentive </li></ul></ul>How can the government make sure we get clean energy?
  8. 9. How Taxes Affect Price <ul><li>Increases Price </li></ul><ul><li>Reduces quantity sold </li></ul><ul><li>Generates revenue for government </li></ul>
  9. 10. Providing Public Goods <ul><li>Products or services that benefit the whole community </li></ul><ul><li>Enjoy benefits without paying for them </li></ul><ul><li>Examples: </li></ul><ul><ul><ul><li>Public Transportation </li></ul></ul></ul><ul><ul><ul><li>Parks </li></ul></ul></ul><ul><ul><ul><li>Drinking Water </li></ul></ul></ul><ul><ul><ul><li>Trash Collection </li></ul></ul></ul><ul><ul><ul><li>National Defense </li></ul></ul></ul><ul><ul><ul><li>Health Care? </li></ul></ul></ul>
  10. 11. Government in Charge <ul><li>Government Monopoly </li></ul><ul><li>Electricity </li></ul><ul><li>Gas </li></ul><ul><li>Mail </li></ul><ul><li>Subsidies </li></ul><ul><li>Farming </li></ul><ul><li>Environmental protection </li></ul><ul><li>Sports Stadiums </li></ul><ul><li>Medical Research </li></ul><ul><li>Space Exploration </li></ul>
  11. 12. Public Bads <ul><li>Negative externalities </li></ul><ul><ul><li>Pollution </li></ul></ul><ul><ul><li>Dangerous substances </li></ul></ul><ul><ul><ul><li>Drugs </li></ul></ul></ul><ul><ul><ul><li>Alcohol </li></ul></ul></ul><ul><ul><ul><li>Tobacco </li></ul></ul></ul><ul><ul><li>Taxed to reduce demand </li></ul></ul>

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