ECN 001A Lecture Notes - Lecture 12: Salad Bar, Ecotax, Passive Smoking

112 views4 pages

aquamarinehound811

4 Mar 2017

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

limepig485 and 4 others unlocked

ECN 001A Full Course Notes

Verified Note

14 documents

Document Summary

Markets are usually a good way to organize economic activity. In absence of market failures, the competitive market outcome is efficient, and maximizes total surplus. Externalities = the uncompensated impact of one person"s actions on the well-being of a bystander (behavior we take as a society as a whole (as consumers/producers) that affect a third party) Can be negative or positive, depending on whether impact on bystander is adverse or beneficial. Self-interested buyers and sellers neglect the external costs or benefits of their actions. In presence of externalities, public policy can improve efficiency. Not thinking about the aftereffect from doing so-and-so. **society isn"t fully capturing the cost of producing the good. End up producing more than we should than the social optimal. Social cost: private cost (supply) + external cost. External cost: value of the negative impact on bystanders. **overproduction of good (too much of a good) per gallon (value of harm from smog, greenhouse gases)

Related Questions

Purpose of Assignment

In Week 2, students will employ the supply and demand model to develop consumer surplus and producer surplus as a measure of welfare and market efficiency. Students learn about welfare economics--the study of how the allocation of resources affects economic well-being--and will discover that under most circumstances, the equilibrium price and quantity is also the one that maximizes welfare. Students will review different sources of externalities and a variety of potential cures and will see that while markets are usually a good way to organize economic activity, governments can sometimes improve market outcomes. Students will see how the U.S. government raises and spends money and the difficulty of making a tax system both efficient and equitable.

Assignment Steps

Scenario: Imagine you have been assigned the responsibility of preparing a paper for the governor's next economic conference.

Prepare a 1,050-word paper addressing the following:

Explain why equilibrium of supply and demand is desirable.

Explain the following concepts using the concept of consumer and producer surplus:

Efficiency of markets

Costs of taxation

Benefits of international trade

Discuss how externalities may prevent market equilibrium and the various government policies used to remedy the inefficiencies in markets caused by externalities.

Analyze the difference between the efficiency of a tax system and the equity of a tax system as it refers to the costs imposed on taxpayers using the benefits principles.

Cite a minimum of three peer-reviewed sources, not including your textbook.

Format consistent with APA guidelines.

rosegerbil765

1. You and other college students are deciding whether to major in music or engineering. You learn that there is a shortage of engineers making it easy for engineering graduates to find employment while there is a glut of musicians for whom finding a job is difficult. As a result, you and many other college students decide to major in engineering. What economic principle does this illustrate?

a. Specialization leads to economic efficiency

b. Government intervention can improve efficiency when there is a market failure

c. Individuals do not normally take into account the decisions of other individuals

d. Markets tend to move towards equilibrium as individuals respond to incentives

e. Changes in incentives are unlikely to change the decisions people make

2. Which of the following describes the equity-efficiency trade-off?

a. Actions intended to make economic outcomes fairer can cause efficiency to decrease

b. Government intervention can increase efficiency in a market

c. There is always a more equitable outcome that is also more efficient

d. The least efficient economic outcome is the fairest outcome

3. John works eight hours per day. Today he has to decide whether to work overtime and stay one more hour in the office, or go back home and spend that hour studying for his economics exam. His company pays him $70 per day if he works 8 hours, and $100 per day if he works nine hours. Assuming that, if John studies one more hour, his exam score increases from 75 to 80, what is John's rational decision?

a. John decides to work overtime only if he values getting a 5 point increase on his exam score less than $30

b. John decides to work overtime only if he values getting an 80 on his exam more than $100

c. John decides to work overtime only if he values getting an 80 on his exam less than $100

d. John decides to work overtime only if he values getting a 5 point increase on his exam score more than $30

carminecrab519

ECN 001A Lecture Notes - Lecture 12: Salad Bar, Ecotax, Passive Smoking

ECN 001A Full Course Notes

Document Summary

Get access

Related Documents

ECN 001A Lecture Notes - Lecture 3: Invisible Hand, Externality, Stagflation

ECON 2304 Lecture Notes - Lecture 15: Smog, Salad Bar, Passive Smoking

ECON 1 Lecture Notes - Lecture 9: Passive Smoking, Market Failure, Externality

Related Questions