Flashcards on Public Goods, Market Failure, and Intervention
Public Goods, Market Failure, and Intervention Explained
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Public Economics
9 cards
Card 1
Question: What is the public sector?
Answer: The part of the economy where business activity is owned, financed and controlled by the state and goods and services are provided by the state on beh
Card 2
Question: What is the private sector?
Answer: The part of the economy where business activity is owned, financed and controlled by private individuals.
Card 3
Question: Why do governments intervene in markets to provide goods and services?
Answer: Because government policy can potentially remedy market failures and raise economic well-being when markets fail to allocate goods efficiently.
Card 4
Question: What is cost-benefit analysis in the context of providing public goods?
Answer: A study that compares the costs and benefits to society of providing a public good, requiring total benefits of all users to be compared with the cost
Card 5
Question: What challenge do free goods present for economic analysis?
Answer: When goods are available free of charge, the market forces that normally allocate resources are absent, making allocation difficult to analyze.
Card 6
Question: What are the two key reasons merit goods may be under-consumed by the market?
Answer: Consumers may have imperfect information about the benefits, and individuals don’t take account of social benefits when making decisions.
Card 7
Question: Give an example of private and social benefits for education mentioned in the content.
Answer: Private benefit: career prospects. Social benefit: improved stock of human capital.
Card 8
Question: What is intertemporal choice as stated in the content?
Answer: A decision process where choices made today can affect choices facing individuals in the future.
Card 9
Question: How do governments decide on the quantity of public goods to provide?
Answer: Governments make quantity decisions based upon cost-benefit analysis.