Externalities
What is an externality?
Unexpected cost or benefit from producing a good.
Who fixes possible market failures?
The Government
What type of tax is used?
Timmy makes $100,000 and is taxed $10,000
Mommy makes $250,000 and is taxed $50,000
Progressive Tax
What part of public goods does the following example relate to?
Multiple people can be in a public park at one time.
Non-rival in consumption
As of 2020 how many people live in Tucson, AZ?
Give an example of a POSITIVE externality.
Something with a positive externality.
What type of market failure is described?
There is no tax structure in place.
Income inequality.
What type of tax is being used?
Tommy makes $6 and is taxed $3.
Tom Tom makes $40,000 and is taxed $20,000.
Proportional or Flat Tax
What part of private goods does the following example relate to?
If you don't pay for a bus ticket, you can't use it.
Excludable
How many species of insects are presumed to be on the Earth?
2 million - 30 million
Give an example of a NEGATIVE externality.
A negative externality.
When does a market failure occur?
Market produces the wrong amount of a good.
Market fails to allocate resources.
(answers may vary)
What type of tax is being used?
Bartholomew Sampson the Fourth Junior makes $430,000,000 and is taxed $42.69.
Bart makes $65,000 and is taxed $40,000.
Regressive Tax
Someone is using the water fountain at a public park, so you are waiting in line to use it.
Is it excludable? Is it Rival in Consumption?
Excludable: no
RiC: Yes
What country's flag is described?
Red stripe on top and bottom, white stripe in middle, all stripes are the same size.
Austria
Is it positive or negative?
The government changes the smoking age to 35.
Positive.
Name all categories that market failures can fall into.
Lack of competition
Absence of public goods
Income inequality
Unresolved externalities
What type of tax system does the United States use?
Progressive Tax
How much of a public good be supplied to the market?
Draw the flag of Azerbaijan. Team that is closest to correct gets the points.
light blue
red, white crescent with star, red
green
What can we do to fix a positive externality?
Individual Bargaining
Subsidize producers and/or consumers
Government provision
What type of market failure is described?
The government says that they are going to make people pay to enter all parks.
Too few public goods.
Payson is a bozo, so he makes $20,000 and is taxed $13,000.
Nicholas is not a bozo, so he makes $20,001 and is taxed $13,001
What percent of each person's income is being taxed?(use a calculator)
What tax structure is demonstrated by the Nicholas-Payson example.
Payson is taxed 65%
Nicholas is taxed 65.0017%
So it is a Progressive Tax.
Is the college a private or public good and why?
You get a scholarship to go to a normally expensive college.
Private. It is excludable. Just because you don't have to pay for it, there is still a paywall in front of the good.
What is the Free Rider Problem? Give an example.
People know that they can use a good or service while other people pay for it, which causes the government to have to step in and pay for it.
Essentially: People don't take care of public goods.
Ex: People use parks while the government and other people pay for it.