assignment 2

assignment 2 - Dana Margulies EconAssignment 2 I nvisible...

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Dana Margulies Econ—Assignment 2 Invisible hand: self- interest—a concept introduces by Adam Smith in 1776 to describe the paradox of laissez- faire market economy. Private interest can lead to public gain when it takes place in a well- functioning market mechanism - Private profit and public interest - Same year as declaration of independence - Market economies are efficient but not equitable (fair) - Efficiency - promote competition, curb externalities like pollution, and provide public good a. Markets can fall short of efficient perfect competition: monopolies, externalities (pollution) and public good (national defense and light houses) b. Market economies- capitalist c. Non-market economies- socialism, communism 1. Central planning- info and incentive problems d. Regulate market power/ monopoly (antitrust laws) e. Deal with negative externalities/spillovers (pollution, carbon, warming/ regulation vs. market mechanisms) f. Provides public goods (posiive externalities - Equity - redistribution—using tax expenditures to redistribute income
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assignment 2 - Dana Margulies EconAssignment 2 I nvisible...

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