Econ 1-21 Markets Failures, Taxes, Subsidies

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STANDARD:
E.4.1 Explain how markets underproduce public goods, and analyze the role of government to resolve those market failures.
E.4.2 Describe how the government taxes negative externalities (spillovers) and subsidizes positive externalities to resolve the inefficiencies they cause.
E.4.3 Describe the major revenue and expenditure categories in state and federal budgets and their respective proportions, and the challenges of achieving a balanced budget. (E)
E.4.4 Determine whether different types of taxes (e.g., income tax, sales tax, and Federal Income Contributions Act [FICA] tax including Social Security and Medicare) are progressive, proportional, or regressive. (E)
E.4.5 Define budget debt and budget deficit and distinguish between the two. Explain the effects of both on the economy. (E)
GE.7.1 Define and explain fiscal policy and its tools. (E)
GE.7.2 Define and explain monetary policy and its tools. (E)
GE.7.3 Analyze how the government uses fiscal policy to promote price stability, full employment, and economic growth.
GE.7.4 Explain how the use of fiscal policy affects budget deficits or surpluses and the national debt.
GE.7.5 Analyze how the Federal Reserve uses monetary policy to promote price stability, full employment, and economic growth. (E)

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Lance Hiles

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Econ 1-21 Markets Failures, Taxes, Subsidies


Econ 1-21 Markets Failures, Taxes, SubsidiesOnline version STANDARD: E.4.1 Explain how markets underproduce public goods, and analyze the role of government to resolve those market failures. E.4.2 Describe how the government taxes negative externalities (spillovers) and subsidizes positive externalities to resolve the inefficiencies they cause. E.4.3 Describe the major revenue and expenditure categories in state and federal budgets and their respective proportions, and the challenges of achieving a balanced budget. (E) E.4.4 Determine whether different types of taxes (e.g., income tax, sales tax, and Federal Income Contributions Act [FICA] tax including Social Security and Medicare) are progressive, proportional, or regressive. (E) E.4.5 Define budget debt and budget deficit and distinguish between the two. Explain the effects of both on the economy. (E) GE.7.1 Define and explain fiscal policy and its tools. (E) GE.7.2 Define and explain monetary policy and its tools. (E) GE.7.3 Analyze how the government uses fiscal policy to promote price stability, full employment, and economic growth. GE.7.4 Explain how the use of fiscal policy affects budget deficits or surpluses and the national debt. GE.7.5 Analyze how the Federal Reserve uses monetary policy to promote price stability, full employment, and economic growth. (E) by Lance Hiles A B C D E F G H K L M N O P R T U V X Y Contains A Market-based policies are better than regulatory policies, because the government is ____ tax revenue instead of spending money to enforce laws. But in reality, the government does both. Contains B If something is for our collective well being (education, police), & it is non-exclusion & non-rivalry, we call it a ____ ____ . Contains C Federal grants that subsidize college education will ____ the amount of education. While a tax on the production of TVs (or the chemicals being used) will ____ production (and pollution). Contains D ____ and ____ is a market-based policy that addresses industrial emissions. Factories must buy permits from the government, or they cannot emit pollution. But factories can sell their permit if they don't pollute, which is an incentives to go green. Contains E Schools are positive externalities, because they create income for people. They also teach you to participate in government & they create more ____ ____ for the government, from the higher incomes. Contains F Private schools charge tuition to fund education, based on supply & demand, so there might not be enough ____ schools for everyone. The government believes the external benefits (informed citizens) are worth forcing everyone to pay taxes. Contains G ____ of the commons is when the common goods that everyone has access to are misused. e.g. pollution, deforestation. People do what is best for them, instead of what is best for society. Contains H The EPA is a government agency that uses regulatory policy to end externalities like water contamination. They ban the use of certain ____ . They limit the number of products made, limiting the pollution. Contains K Subsidies & taxes are ____- ____ policies used by the government. They resolve externalities like pollution & ignorance by altering incentives, prices, & markets. They fix market failures. Contains L Select either 2 or 6 points to be added to your paper. If more than 10% select 6 points, 0 points are added. This is the biggest problems with free markets: sometimes people have a ____ incentive to do something against ____ interest. Contains M Since people aren't perfect and since markets fail, the ____ has many opportunities to intervene in the economy. Sometimes the [same] takes over & sometimes it just changes prices & incentives. Contains N TV factory pollutes a river with chemicals, a negative externality. It has ____ costs: workers, materials, energy. It uses those costs to determine how many TVs to produce. But there are ____ costs with polluting: dead fish, sick people. Contains O External costs (dead fish, sick people) are paid by people downstream, not the factory. But a free market assumes all the costs of producing TVs are in the price. This is a market failure because the factory is producing ____ ____ TVs . Contains P If you can’t stop people from ____ resources, you have an incentive to do it first; Make as much profit as quickly as you can. When all people do this, limited resources are exhausted. Contains R Select to pay $20 or $100 for fire dept, but if 50% choose $20, there is no fire dept. This is a ____ ____ problem. [same] are people who want the benefits, but who don't want to pay. Contains T Sometimes unregulated markets don’t produce the outcome that society wants, because they don't have the right price signals. ____ are situations when there are external costs or benefits happening to society. Contains U If you provide police to discourage crime, there is no way to discourage crime only in the homes that pay taxes. The protection provided by police is a benefit to everyone in the city, even if they don't pay taxes. This idea is called non ____ . Contains V Roads are a public good because when a person drives on them, they can still be used by other people. One person using them does not prevent others from doing the same. This is the idea of non ____ . Roads are shared & can be used everyday. Contains X Governments deal with free riders by requiring everyone to pay. No one is asked & given a choice. Since protecting the town is significant, citizens are not permitted to opt out. Citizens pay the government through ____ . Contains Y Speed limits. Building permits. The death penalty. This is the government controlling your life through ____ policies, or rules.

Econ 1-21 Markets Failures, Taxes, Subsidies

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Econ 1-21 Markets Failures, Taxes, SubsidiesOnline version

by Lance Hiles

Contains A

Market-based policies are better than regulatory policies, because the government is ____ tax revenue instead of spending money to enforce laws. But in reality, the government does both.

Contains B

If something is for our collective well being (education, police), & it is non-exclusion & non-rivalry, we call it a ____ ____ .

Contains C

Federal grants that subsidize college education will ____ the amount of education. While a tax on the production of TVs (or the chemicals being used) will ____ production (and pollution).

Contains D

____ and ____ is a market-based policy that addresses industrial emissions. Factories must buy permits from the government, or they cannot emit pollution. But factories can sell their permit if they don't pollute, which is an incentives to go green.

Contains E

Schools are positive externalities, because they create income for people. They also teach you to participate in government & they create more ____ ____ for the government, from the higher incomes.

Contains F

Private schools charge tuition to fund education, based on supply & demand, so there might not be enough ____ schools for everyone. The government believes the external benefits (informed citizens) are worth forcing everyone to pay taxes.

Contains G

____ of the commons is when the common goods that everyone has access to are misused. e.g. pollution, deforestation. People do what is best for them, instead of what is best for society.

Contains H

The EPA is a government agency that uses regulatory policy to end externalities like water contamination. They ban the use of certain ____ . They limit the number of products made, limiting the pollution.

Contains K

Subsidies & taxes are ____- ____ policies used by the government. They resolve externalities like pollution & ignorance by altering incentives, prices, & markets. They fix market failures.

Contains L

Select either 2 or 6 points to be added to your paper. If more than 10% select 6 points, 0 points are added. This is the biggest problems with free markets: sometimes people have a ____ incentive to do something against ____ interest.

Contains M

Since people aren't perfect and since markets fail, the ____ has many opportunities to intervene in the economy. Sometimes the [same] takes over & sometimes it just changes prices & incentives.

Contains N

TV factory pollutes a river with chemicals, a negative externality. It has ____ costs: workers, materials, energy. It uses those costs to determine how many TVs to produce. But there are ____ costs with polluting: dead fish, sick people.

Contains O

External costs (dead fish, sick people) are paid by people downstream, not the factory. But a free market assumes all the costs of producing TVs are in the price. This is a market failure because the factory is producing ____ ____ TVs .

Contains P

If you can’t stop people from ____ resources, you have an incentive to do it first; Make as much profit as quickly as you can. When all people do this, limited resources are exhausted.

Contains R

Select to pay $20 or $100 for fire dept, but if 50% choose $20, there is no fire dept. This is a ____ ____ problem. [same] are people who want the benefits, but who don't want to pay.

Contains T

Sometimes unregulated markets don’t produce the outcome that society wants, because they don't have the right price signals. ____ are situations when there are external costs or benefits happening to society.

Contains U

If you provide police to discourage crime, there is no way to discourage crime only in the homes that pay taxes. The protection provided by police is a benefit to everyone in the city, even if they don't pay taxes. This idea is called non ____ .

Contains V

Roads are a public good because when a person drives on them, they can still be used by other people. One person using them does not prevent others from doing the same. This is the idea of non ____ . Roads are shared & can be used everyday.

Contains X

Governments deal with free riders by requiring everyone to pay. No one is asked & given a choice. Since protecting the town is significant, citizens are not permitted to opt out. Citizens pay the government through ____ .

Contains Y

Speed limits. Building permits. The death penalty. This is the government controlling your life through ____ policies, or rules.

If something is for our collective well being (education, police), & it is non-exclusion & non-rivalry, we call it a .

Federal grants that subsidize college education will the amount of education. While a tax on the production of TVs (or the chemicals being used) will production (and pollution).

and is a market-based policy that addresses industrial emissions. Factories must buy permits from the government, or they cannot emit pollution. But factories can sell their permit if they don't pollute, which is an incentives to go green.

Schools are positive externalities, because they create income for people. They also teach you to participate in government & they create more for the government, from the higher incomes.

Subsidies & taxes are - policies used by the government. They resolve externalities like pollution & ignorance by altering incentives, prices, & markets. They fix market failures.

Select either 2 or 6 points to be added to your paper. If more than 10% select 6 points, 0 points are added. This is the biggest problems with free markets: sometimes people have a incentive to do something against interest.

TV factory pollutes a river with chemicals, a negative externality. It has costs: workers, materials, energy. It uses those costs to determine how many TVs to produce. But there are costs with polluting: dead fish, sick people.

External costs (dead fish, sick people) are paid by people downstream, not the factory. But a free market assumes all the costs of producing TVs are in the price. This is a market failure because the factory is producing TVs .

Select to pay $20 or $100 for fire dept, but if 50% choose $20, there is no fire dept. This is a problem. [same] are people who want the benefits, but who don't want to pay.