IBE316midterm - IBE316:EconomicPolicy Midterm Name: ID:

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IBE316: Economic Policy Midterm Name: ID: Question 1. Short Answer Questions a. Explain why most countries are mixed economies. The private sector is in general more efficient than the government in  producing goods, however, there are market failures, which the  government can fix by intervening into the market. b. Briefly define positive and normative economics and explain the relationship  between the two. Positive economics uses models to figure out the outcomes of policies  whereas normative economics evaluates alternative policies. In order to  carry out normative economics, we need positive economics to figure out  the costs and benefits of each policy. c. Explain why property rights and contract enforcement are essential to the economy. Without property rights, there is no incentive to possess assets, which  means that there will be no economic activity such as buying and selling.  Without contract enforcement, there is no incentive to borrow of lend so  there will be no investment and hence production. d. Why does the government intervene in the market even when the economy is  efficient? Even if the economy is efficient, the government might want to change the 
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This note was uploaded on 10/22/2011 for the course ECON 316 taught by Professor Keisukeotsu during the Spring '08 term at Sophia University.

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IBE316midterm - IBE316:EconomicPolicy Midterm Name: ID:

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