Macro Econ Chapter 4 Homework Notes●Market failure describes the inability of a market to bring about the allocation ofresources that best satisfies the wants of society.●Consumer surplus is the difference between the maximum price a consumer is willing topay for a product and the price paid.●Producer surplus is the difference between the actual price a seller receives and theminimum acceptable price. Show Get answer to your question and much more ●Which of the following are achieved at the equilibrium quantity of a good or service? Get answer to your question and much more ●Which of the following are signs of a market failure? Get answer to your question and much more ●Points on the supply curve represent marginal cost.●Producer surplus is the difference between the actual price a seller receives and theminimum acceptable price. Get answer to your question and much more Notes This preview shows page 1 - 2 out of 4 pages. Chapter 4: Market Failures: Public Goods and Externalities.1.The market demand curve for positive externalities reflects only the direct private benefitto the individuals who consume the product.2.Anexternalitycauses some of the benefits or costs of a market transaction to be passedon the third party.3.If a third party to a market transaction is experiencing an uncompensated, then thetransaction results in a market failure known asa spillover cost or negative externality.4.An externalityis a cost or a benefit accruing to an individual group, a third party, that isexternal to a market transaction.5.The situation when people can receive the benefits from a good without having to pay forit is known as thefree-rider problem.6.The three options available to government in order to correct spillover benefits or theunder allocation of resources are:subsidies to buyers, subsides to producer, andgovernment provision of public goods.7.Which of the following justifies government intervention in the economy?Marketfailures.8.When there is no effective way of keeping individuals from the benefit of a good once itcomes into existence, the characteristic of the good becomes distinguished byno-excludability.9.Which of the following would be considered private goods? Clothing and automobiles.10.A positive externality is an uncompensated spillover benefit.11.A private good is excludable when a seller can prevent people who did not pay for aproduct from obtaining its benefits.12.Which of the following refers to reduction of combined consumer and producer surplusassociated with underproduction or overproduction of a product? Deadweight loss orefficiency loss. Upload your study docs or become a Course Hero member to access this document We have textbook solutions for you! The document you are viewing contains questions related to this textbook. Health Economics and Policy Henderson Expert Verified Upload your study docs or become a Course Hero member to access this document End of preview. Want to read all 4 pages? Upload your study docs or become a Course Hero member to access this document We have textbook solutions for you!The document you are viewing contains questions related to this textbook. The document you are viewing contains questions related to this textbook. Health Economics and Policy Henderson Expert Verified What government policies can be used to correct a negative externality?Correcting Negative Externalities
Government can play a role in reducing negative externalities by taxing goods when their production generates spillover costs. This taxation effectively increases the cost of producing such goods.
How do you deal with negative externalities?One of the solutions to negative externalities is to impose taxes to change people's behavior. The taxes can be imposed to reduce the harmful effects of certain externalities such as air pollution, smoking, and drinking alcohol.
What are three ways the government can deal with negative externalities?Negative externalities often cause markets to fail. When that happens, the government can respond by using one of three types of policies: regulation, Pigovian taxes, and tradable pollution permits. Regulation allows the government to reduce externalities by passing new laws that directly regulate problematic behavior.
What are the ways in which the problems caused by externalities can be resolved?Externalities can be solved without government intervention through moral codes and social sanctions (such as littering), charities, merging firms whose externalities affect each other, or by contract.
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Identify policies for coping with the overallocation of resources caused by negative externalities.
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