Queen's Econ 110 final exam- Spring-Questions and 100% Correct Verified Answers

Queen's Econ 110 final exam- Spring-Questions and 100% Correct Verified Answers Assymetric information - ANSWER -When one party to a transaction has access to relevant information that the other party doesn't, i.e. doctor. Moral Hazard - ANSWER -a situation in which an individual or a firm takes advantage of special knowledge while engaging in socially inefficient behaviour ex going to dentists, asking if you needed a cleaning. they can lie to get more money or they could tell the truth Adverse Selection - ANSWER -Self-selection, within a single risk category, of persons of above-average risk. someone with a heart condition may choose to purchase more insurance coverage without a medical examination. company can limit this requiring a physical examination income distribution - ANSWER -redistribute income equally. leaky budget public provision - ANSWER -the production of a good or service by a public authority that receives most of its revenue from the government protecting individuals from others - ANSWER -child labour, force kids to go to school, protection of those who cannot make rational decisions. paternalism - ANSWER -intervention in the free choices of individuals by others to protect them against what is presumed to be their own ignorance. drugs are made illegal Social Responsibility - ANSWER -jury duty, voting, military service in some countries. policy effects on economic growth - ANSWER -living standards usually grow faster in countries with high rates of economic growth government intervention - ANSWER -The practice of government to intervene in markets, preventing the free functioning of the market, usually for the purpose of achieving particular economic or social objectives. tools of government intervention - ANSWER -public provision, redistribution programs, regulation, altered incentives public provision - ANSWER -used in the interest of redistribution and other social goals redistribution programs - ANSWER -economic policies designed to control the economy through taxing and spending, with the goal of benefiting the poor regualtion - ANSWER -government restriction or supervision of privately owned activity altered incentives - ANSWER -government can adjust tax system to provide subsidies for some behaviour and penalties for other ex. increased tax on gas causes reduction in quantity used. the cost of government intervention - ANSWER -large potential benefits don't neccesarily justify government intervention; nor do large potential necessarily make it otherwise. direct costs - ANSWER -ment government actually spends also includes efficency cost of tax revenue. government failure - ANSWER -government intervention that fails to improve economic outcomes pollution as an externality - ANSWER -internalizing the externality: a process that results in a producer taking account of a previously external effect. progressive tax - ANSWER -A tax for which the percentage of income paid in taxes increases as income increases proportional tax - ANSWER -A tax in which the average tax rate is the same at all income levels. regressive tax - ANSWER -A tax for which the percentage of income paid in taxes decreases as income increases average tax rate - ANSWER -total taxes paid divided by total income marginal tax rate - ANSWER -the extra taxes paid on an additional dollar of income differences in tax bases - ANSWER -every province should have the same public services basic functions of government - ANSWER -when the governments monopoly of violence is secure and functions with effective restrictions against its arbitrary use, citizens can safely carry out their ordinary economic social activities the case for free markets - ANSWER -the informal defence of free markets is based off three arguments 1. free markets provide automatic coordination of the actions of decentralized descision makers 2. the pursuit of profits in free markets provides a stimulus to innovation and rising material living standards 3. free markets permit a decentralization of economic power