economics 3

  1. enforces "rules of the game"
    • maintains legal environment for business
    • protects private property
    • enforce legal contracts
    • advertising laws/consumer safety
  2. promotes competition
    prevent monopolies which when improperly utilized results in inefficiency.
  3. regulates natural monopolies
    single firm can serve a market most effeciently; economies of scale
  4. provides public goods
    goods that nonpayers cannot be excluded from. leads to free rider dilemma and profitability problems.
  5. deals with externalites
    outside of market economy; positive and negative
  6. provides for social justice
    fair distribution of income or economy; redistribution in name of fairness
  7. promotes full employment, stable prices, and high rate of growth
    employment act of 1946 - gvmt to ensure by fiscal policy(spending and taxation) and monetary policy(money supply and interest rates)
  8. deals with problem that "individual goods can be collective bads"
    falacy of composition; convienence v longterm value
  9. ways in which the gvmt deals with market failure
    market failure is when the economy overproduces or underproduces certain goods
Card Set
economics 3
ways in which the gvmt deals with market failure