EC302 Microeconomic Analysis - Week 3, Lecture 1
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Questions and Answers

What is the primary goal of public economics?

  • To reduce government influence in economic decisions
  • To promote monopolies in the market
  • To establish a fixed price system
  • To estimate the effects of government policy on behavior (correct)
  • How do principles of demand and supply relate to government actions?

  • They are essential for assessing public policy consequences (correct)
  • They are irrelevant in public policy contexts
  • They negate the need for government intervention
  • They apply only to the private sector
  • What is a key economic function of government when market failures occur?

  • Increasing taxes on all goods
  • Limiting public sector involvement
  • Allocating resources efficiently (correct)
  • Creating more markets
  • Which statement best describes the relationship between social marginal benefit and social marginal cost in public policy?

    <p>They should be equal to maximize social welfare</p> Signup and view all the answers

    Which of the following represents a key characteristic of government in economic terms?

    <p>It is a powerful force in demand and supply dynamics</p> Signup and view all the answers

    What is the main focus of Social Democrats regarding market allocation?

    <p>Emphasizing government redistribution</p> Signup and view all the answers

    Which of the following is NOT a potential role of government identified in the content?

    <p>Regulatory function</p> Signup and view all the answers

    What are the main forms of market failure that governments aim to address?

    <p>Public goods, externalities, and distributive imbalance</p> Signup and view all the answers

    Which function specifically pertains to alleviating poverty and reducing income inequality?

    <p>Redistributive function</p> Signup and view all the answers

    What is the purpose of the stabilisation function of government?

    <p>To manage aggregate demand and ensure price stability</p> Signup and view all the answers

    What does globalization potentially impact regarding government functions?

    <p>It limits government capacity to manage economies</p> Signup and view all the answers

    Which of the following is a key question in public policy analysis?

    <p>What are the objectives?</p> Signup and view all the answers

    Which principle relates to the behavior and decision-making processes in both public and private sectors?

    <p>Scarcity and opportunity costs</p> Signup and view all the answers

    What is the primary objective of public economics?

    <p>Maximizing public welfare</p> Signup and view all the answers

    Which view holds that goals are established by the government itself?

    <p>Organic view</p> Signup and view all the answers

    Which group advocates for a command and control economy?

    <p>Socialists</p> Signup and view all the answers

    What is a key characteristic of the mechanistic view of government?

    <p>It views government as a vehicle for societal goals.</p> Signup and view all the answers

    How do conservatives differ from libertarians regarding government intervention?

    <p>Conservatives believe some government actions can be more effective than private sector solutions.</p> Signup and view all the answers

    What emphasizes that the government should intervene when markets fail to ensure equitable distribution?

    <p>Socialist ideology</p> Signup and view all the answers

    What is the defining attribute of government?

    <p>Authority</p> Signup and view all the answers

    Which principle questions when and how government should intervene in the economy?

    <p>Public policy analysis</p> Signup and view all the answers

    Study Notes

    EC302 Microeconomic Analysis - Week 3, Lecture 1

    • Public economics focuses on maximizing public welfare, also known as welfare economics.
    • The government plays a critical role in decisions to achieve public welfare goals.
    • Views on government functions depend on how people view the relationship between the individual and the state, and the effectiveness of markets versus government.
    • Two main views exist regarding the state:
      • Organic view: society's goals are set by the government, giving the state inherent value.
      • Mechanistic view: society sets goals, the state is a tool to achieve those goals.
    • The mechanistic view further divides into four perspectives:
      • Libertarians: strong support for private property, advocate limited government intervention in private exchanges, viewing markets as efficient.
      • Socialists: advocate for a command and control economy, believing market systems distribute rewards unequally; therefore, full equity necessitates government intervention.
      • Conservatives: question government's role, favor market distribution but believe the government can perform some tasks better than the private sector.
      • Social Democrats: recognize market productivity's limitations in efficiently allocating resources with unequal distributions; thus, government intervention is crucial for redistribution.
    • Government's fundamental economic role is to establish institutions and rules enabling market functionality.
    • Government intervention is necessary when markets fail (public goods, externalities, imperfect competition, information failures), exhibit uneven income redistribution, or display macroeconomic instability.
    • Potential government functions include allocative function, redistributive function, and stabilization function.
    • Allocative function: providing public goods, regulating externalities, promoting competitive markets, and protecting individuals from information failures.
    • Redistributive function: alleviating poverty and reducing income inequality.
    • Stabilization function: managing aggregate demand to achieve price stability, high employment, and reduce output fluctuations.
    • The extent of government's economic role depends on market weaknesses and the government's ability to achieve desirable outcomes—and globalization has potentially weakened governmental control.
    • Crucial public policy questions include:
      • What are the objectives?
      • What are the options?
      • What are the implications of each option?
      • Which is the preferred option?
    • Seven fundamental economic principles apply to the public sector:
      • Scarcity, choice, and opportunity costs apply to economies, including the public sector.
      • Trade is essential for gaining benefits in markets.
      • Incentives influence behavior in the public sector, as in the private sector.
      • Demand and supply concepts apply even in the absence of price signals.
      • Efficient production (cost, division of labor) applies to the public sector.
      • Markets are crucial demand and supply forces; often, government actions support market function.
      • Social welfare maximization is constrained and implies social marginal benefit equaling social marginal cost.
    • Principles of economics applicable to government actions mirror those in the private sector.
    • Positive economics estimates how government policy affects individual behavior; normative economics guides decisions regarding which policies are preferred.
    • The government's key attribute is power; it encompasses all budget-funded services (including public and private sectors).

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    Description

    This quiz explores the concepts of public economics and the role of government in achieving public welfare. It analyzes different perspectives on the relationship between the individual and the state, including organic and mechanistic views. The quiz also covers libertarian and socialist perspectives on government intervention and market efficiency.

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