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Unformatted text preview: ECO 100Y Introduction to Economics Topic 10: Role and Impact of Government Source: LR 12, LR 11 and LR10, Chapters 12, 16, 17, 18 (There are many interesting ideas in these chapters to challenge your economics reasoning skills, and to provide you with insights into government policies. However, in the everyday world of students, the short-term incentive system relates to marks you can be guided in that regard by what I cover in class!) 1 Topic 10: Government ECO 100 W.G. Wolfson The Optimality of Competition and The Lure of Markets Perfect Competition: Allocative Efficiency Production Efficiency The Market System: Decentralized Responsive to Consumers Automatic coordination Creative destruction ECO 100 W.G. Wolfson 2 Topic 10: Government 1 2 Why Intervene in Markets? 1. Market Failure Externalities 3 rd party effects Difference between private costs and social costs Difference between private benefits and social benefits Market Power Natural monopoly Unnatural monopoly...
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- Spring '08