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 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 Automatic coordination - ANSWER -defenders of market economics -argue they're more flexible and adjust quickly to changes ex. price of oil rises therefore people will use their cars less and use less heat. innovation and growth - ANSWER -economy grows from new products and processes creating profits. They attempt to allocate resources to successful innovations. sometimes works in monopolized or imperfect markets through creative desctruction decentralization of power - ANSWER -since trade is voluntary, power is constricted through competitors and new products Market failure - ANSWER -describes a situation in which the free market, in the absence of government intervention, fails to achieve allocative efficiency Market power - ANSWER -government policy tries to minimize DWL while encouraging innovation and productivity growth. governments use competition policy to prevent monopolistic practices. Externalities - ANSWER -an effect on parties not directly involved in the production or use of a commodity. ex smoking in a restaurant effects everyone private cost - ANSWER -the value of the best alternative use of resources used in production social cost - ANSWER -the value of the best alternative use of resources used in production as valued by society positive externality - ANSWER -a competitive free market will produce too little of a good. negative externality - ANSWER -a competitive market will produce too much of a good