Study Guide 3

Study Guide 3 - Study Guide for Final Exam (Please note...

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Study Guide for Final Exam (Please note that the final will be comprehensive, and thus will cover material from the Midterm 1 and Midterm 2 study guides as well.) I. Chapter 12: Governance a. Colonialism i. Recent independence of many low income countries b. Case for Government Intervention i. Market Failures 1. Externalities & Public Goods a. Externalities solved using taxes or subsidies b. Public Goods generally will not be provided without government intervention c. Common Property Goods solved by assigning property rights. 2. Market Power a. Monopoly b. Natural Monopoly i. ATC > MC, so P=MC => profit < 0 3. Coordination Failure ii. Income Redistribution / Goals of Society c. Case against Government Intervention i. Government Failure 1. may not have complete information 2. less efficient than market based firms 3. corruption d. Governance and Income Growth i. Wagner’s Law: as income increases, the size of government tends to increase ii. Importance of Rule of Law / Rules of the Game 1. Social Stability 2. Enforcement of Contracts 3. Consumer Protection Agencies 4. Intellectual Property Rights iii. African vs. Western Justice 1. Truth and Reconciliation Councils iv. Taxation is required for any government program
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1. results in losses in efficiency unless goods with negative externalities are taxed 2. Double Dividend e. Economic Planning
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Study Guide 3 - Study Guide for Final Exam (Please note...

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