A good that would be under provided if the market operated freely as its production is not profitable.
What is a merit good?
100
When the marginal social cost (MSC) is not equal to the marginal social benefit (MSB).
What is the reason for externalities?
100
Set by governments in order to solve the problem of firms who act in their own interests rather than the interests of governments or taxpayers.
What are government regulations?
100
QePe where MSC=MSB.
What is the socially and allocatively point?
100
The positive externalities of doing IB
What is there are none?
200
Something done to encourage supply and therefore the consumption of merit goods.
What is government intervention?
200
When the production of a good/service creates spillover benefits that help a third party not involved in the market transaction.
What are positive externalities of production?
200
When a government provides citizens with free services which are paid for out of general taxation (to overcome market failure).
What is direct government provision?
200
Labelled 'xyz' and is the maximum area representing the utility gained through the achievement of goods and services.
What is potential welfare?
200
To justify government actions, either by minimising the production of goods with negative externalities or encouraging the production of goods with positive externalities.
What are the role of externalities?
300
All of these are merit goods.
What is a public good?
300
When the consumption of a good/service creates positive benefits/spillover benefits for a third party not involved in the market transaction.
What are positive externalities of consumption?
300
1. Generating substantial positive externalities
2. Overcoming problems arising from unequal distribution
3. Preventing potential private monopoly power
4. May give rise to large economies of scale
What are benefits of direct government provision?
300
The vertical distance between the marginal private benefit curve (MPB) and the marginal social benefit curve (MSB).
What is the positive externality?
300
These are used to fund government intervention.
What are taxes?
400
This is because of the under provision of merit goods in a free market. (begins with 'why')
Why are they allocatively inefficient?
400
The private social benefit +/- any external costs or benefits of production.
What is marginal social benefit?
400
When the government adds price controls as a solution to low demand.
What is increasing demand by means of a maximum price?
400
The effect of imposing a subsidy (and the marginal social cost curve (MSC) moving to the right).
What is an increased social efficiency.
400
Include education, healthcare, sports facilities, opera houses, medical research, etc.
What are examples of merit goods?
500
The quantity produced by the free market is less than the socially optimal quantity.
What is the reason for market failure (from positive externalities)?
500
This is what happens when the marginal social benefit is equal to the marginal social cost.
What is no externalities?
500
This is most commonly linked with the provision of schooling and education, whereby a fixed amount of money is given by governments to families so they can send their children to school.
What is the voucher system?
500
Causes supply to shift from S-S1 and lowers the market equilibrium from Pe to P1.
What is the effect of imposing a subsidy?
500
A cause for the market failure whereby merit goods are not consumed because people are unaware of their benefits.