1. Public Goods and Public Policy Promoting Competition Income Inequality
Lesson 21
Sections 76,77,78

2. Private Goods and Others (76)
Characteristics of Goods
Private Good
Excludable
Rival in Consumption
Public Good
Non-excludable
Nonrival in Consumption

3. Public Goods Markets can only supply private goods efficiently
Free-Rider problem

4. Common Resources Non-excludable but rival in consumption
Fishing/Hunting
Overuse

5. Artificially Scarce Goods
Excludable
Nonrival in consumption
Pay-per-view
Cable services
MMO

6. Promoting Competition (77)
Anti-trust policy
Sherman Antitrust Act of 1890
Illegal to make contracts, combinations or conspiracies to restrain interstate commerce
Illegal to monopolize interstate commerce
Clayton Antitrust Act of 1914
Price discrimination
Anti-competitive practices
Anti-competitive mergers and acquisitions
Interlocking directorates
Federal Trade Commission Act of 1914
Unfair or deceptive acts
Price fixing
Output restrictions
Actions that prevent entry to market

7. Dealing With Natural Monopoly
Marginal Cost Pricing
Competitive firm price
Subsidy probably required to operate
Average Cost Pricing
Produce at cost
Subsidy not required
Imperfect information

8. The Problem of Poverty (78)
Trends in Poverty
Poverty Threshold
Poverty Rate
Who are the Poor
What Causes Poverty
Consequences of Poverty

9. Economic Inequality Mean Household Income Median Household Income
Average of all incomes: distorted by the top
Median Household Income
Half earn more, half earn less
Gini Coefficient
Number represents the distribution of income
0 is perfect equality, 1 is perfect inequality

10. Figure Income Inequality Around the World Ray and Anderson: Krugman’s Economics for AP, First Edition Copyright © 2011 by Worth Publishers

11. Anti-Poverty Programs
Means Tested
Benefits available only to qualified individuals
In-Kind Benefits
Non-monetary benefits like Medicaid, food stamps
Social Security
Effect of Programs
Poverty greatly reduced especially among seniors

12. Table Major U.S. Welfare State Programs, 2009 Ray and Anderson: Krugman’s Economics for AP, First Edition Copyright © 2011 by Worth Publishers

13. Table Effects of Taxes and Transfers on the Poverty Rate, 2008 Ray and Anderson: Krugman’s Economics for AP, First Edition Copyright © 2011 by Worth Publishers

14. Debate Over Income Redistribution
Should Government Redistribute Wealth?
Are Social Welfare Programs Causing People Not to Work?
Are Taxes Theft?
Do Progressive Taxes Punish the Rich?
Are Flat Taxes Fair?