Economics at National University Of Singapore | Flashcards & Summaries

Lernmaterialien für Economics an der National University of Singapore

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What are the 3 assumptions under the First Fundamental Theorem of Welfare Economics?

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- There are markets and market prices for all goods

- All buyers and sellers are competitive price takers

- Each person's utility depends on his own consumption

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State the Coase Theorem

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If private parties can costlessly bargain over the allocation of resources, they can solve the externalities problem on their own 

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What does the tragedy of commons refer to?

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It refers to the problem where common resources are prone to overuse due to their non-excludability

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What is the relative tax incidence between buyers and sellers when the supply curve is more elastic and why?

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The tax incidence on the buyers would be larger than that of the sellers, as an elastic supply curve would mean that it is easier for sellers to leave the market than buyers. 

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Where is the consumer surplus located in the demand-supply curve?

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It is under the demand curve above the equilibrium price

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What is the social benefit?

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Social benefit is the sum of the private marginal benefit and the external marginal benefit. (SMB=PMB+EMB)

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TESTE DEIN WISSEN

What is the relative incidence of tax between buyers and sellers when the demand is more elastic than supply and why?

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TESTE DEIN WISSEN

Sellers face a greater incidence of tax, as it is easier for buyers to leave the market than sellers. 

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TESTE DEIN WISSEN

What problem arises from the non-excludability of public goods?

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TESTE DEIN WISSEN

The free-ridership problem

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TESTE DEIN WISSEN

Define the ideal corrective tax and subsidy

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TESTE DEIN WISSEN

Tax = external marginal cost

Subsidy=external marginal benefit

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TESTE DEIN WISSEN

What is the effect of a tax on buyers on the demand-supply curve?

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TESTE DEIN WISSEN

The demand curve shifts down by the amount of the tax

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How is the externality internalized?

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Impose a tax by the amount of the external marginal cost, to shift the supply curve up

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What do the demand and supply curves indicate in welfare economics?

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TESTE DEIN WISSEN

The supply curve is the private marginal cost, or the costs directly incurred by sellers

The demand curve is the private marginal benefit, or the price the buyers are willing to pay

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Beispielhafte Karteikarten für deinen Economics Kurs an der National University of Singapore - von Kommilitonen auf StudySmarter erstellt!

Q:

What are the 3 assumptions under the First Fundamental Theorem of Welfare Economics?

A:

- There are markets and market prices for all goods

- All buyers and sellers are competitive price takers

- Each person's utility depends on his own consumption

Q:

State the Coase Theorem

A:

If private parties can costlessly bargain over the allocation of resources, they can solve the externalities problem on their own 

Q:

What does the tragedy of commons refer to?

A:

It refers to the problem where common resources are prone to overuse due to their non-excludability

Q:

What is the relative tax incidence between buyers and sellers when the supply curve is more elastic and why?

A:

The tax incidence on the buyers would be larger than that of the sellers, as an elastic supply curve would mean that it is easier for sellers to leave the market than buyers. 

Q:

Where is the consumer surplus located in the demand-supply curve?

A:

It is under the demand curve above the equilibrium price

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Q:

What is the social benefit?

A:

Social benefit is the sum of the private marginal benefit and the external marginal benefit. (SMB=PMB+EMB)

Q:

What is the relative incidence of tax between buyers and sellers when the demand is more elastic than supply and why?

A:

Sellers face a greater incidence of tax, as it is easier for buyers to leave the market than sellers. 

Q:

What problem arises from the non-excludability of public goods?

A:

The free-ridership problem

Q:

Define the ideal corrective tax and subsidy

A:

Tax = external marginal cost

Subsidy=external marginal benefit

Q:

What is the effect of a tax on buyers on the demand-supply curve?

A:

The demand curve shifts down by the amount of the tax

Q:

How is the externality internalized?

A:

Impose a tax by the amount of the external marginal cost, to shift the supply curve up

Q:

What do the demand and supply curves indicate in welfare economics?

A:

The supply curve is the private marginal cost, or the costs directly incurred by sellers

The demand curve is the private marginal benefit, or the price the buyers are willing to pay

Economics

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