1. Unit 5 Sides

2. 2 characteristics of a pure public good
Non-excludable
Non-rival

3. 2 characteristics of a pure private good
excludable
rival

4. Types of good the market is least likely to provide
Pure public

5. Problem caused by the non-excludability of public goods
Free rider

6. Because millions can watch TV at the same time without inhibiting each others watching ability, cable television service is
Non rival

7. The government should regulate pollution to the point where _____ = ____
MSB = MSC

8. If a competitive market in equilibrium has MSC > MSB
Negative externality

9. If a competitive market in equilibrium has MSB > MSC
Positive externality

10. Which type of externality results in an under allocation of resources?
positive

11. When graphing a negative externality, the DWL falls to the right of the socially optimal point
See next slide

13. Would a per unit tax move society closer or farther from the socially optimal quantity?
The appropriate action would be a per unit subsidy because this is a positive externality

14. Would a lump sum subsidy move society closer or farther from the socially optimal quantity?
It would not change quantity

15. Quantify a government solution to this market failure.
Per unit subsidy of $6
$30
$23
$20

16. Quantify a government solution to this market failure.
$13
Per unit tax of $25
$100
$90
$75

17. When graphing a positive externality, the DWL falls to the left of the socially optimal point
See next slide

19. The Federal income tax is a progressive tax

20. The sales tax is a regressive tax

21. If one person controls all income in a nation, the Gini coefficient is1

22. The 45 degree line is also known as the line of
equality

23. If the government increases transfers to low income households, what will happen to the Lorenz curve
It moves closer to the line of equality (45 degree)

24. If the government increases transfers to low income households, what will happen to the Gini coefficient?
Gets smaller

25. I should sleep with a mouth guard, but I have zero deductible dental insurance.
Moral hazard