Market failure- a situation in which the market, on its own, fails to allocate resources efficiently
Externalities in the market may cause economic efficiency to be enhanced by government intervention
Since the benefit each citizen receives from having an educated community is a public good, the private market is not the best way to supply education
The government provides public goods because the freerides make it difficult for private markets to supply the socially optimal quantity
The total surplus with a tax = consumer, producer surplus, and tax revenue
If a company does not bear the entire cost of the dioxin it emits it will emit higher levels of dioxin than is socially efficient
A positive externality is a benefit to a market bystander
When the government places a tax on a product the cost of the tax to buyers and sellers exceeds the revenue raised from the tax by the government
The amount of deadweight loss from taxes depends on the price elasticity of demand and supply
The demand curve for a product reflects the value of the product to consumers
Donald produces nails at a cost off 200 per ton if she sells the nails for 500 his producer surplus is 300 per ton
A 100 dollar head tax is an example of a tax that is most economically efficient
Moving production from a high cost producer to a low-cost producer will raise total surplus
Taxes cause dead weight losses beause they prevent buyers and sellers from realizing some of the gains from tade and marginal buyers and seller leave the market causing the quantity sold to falls
In an economy, when do not have a price the government primarily ensures that the good is produced
Examples of private goods are : tennis shoes, pizza, french fires, beer
A concept of negative exnalieities can be made using a college student plays his new stereo system in the residence at 2am
In the market for a good like ice-cream cones price adjusts to balance supply and demand
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