The role of_government_in_a_market_economy
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Transcript of The role of_government_in_a_market_economy
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What do you think?
1. The government should increase taxes to expand programs for the elderly.
2. The government should ease up on regulations protecting the environment.
3. The government should break up existing monopolies.
Do you strongly agree, somewhat agree, somewhat disagree, or strongly disagree with each statement?
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1) Protecting Property Rights Encourages people to…
Take care of their propertyMake the most productive use of their
property
Develop their property in ways that benefit others
Article 1 of the U.S. Constitution
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Monitor mergers
Regulate monopolies
Prohibit price-fixing, bid-rigging, and market division
2) Maintaining Competition
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3) Protecting Consumers, Savers, & Investors
Food & Drug Administration
National Highway Traffic Safety Administration
Consumer Product Safety Commission
Consumers Protected Through…
Federal Deposit Insurance Corporation
Security & Exchange Commission
Savers & Investors Protected Through…
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4) Protecting Workers
The Department of Labor protects workers’ economic rights.
The Occupational Safety and Health Administration protects workers’ physical well being.
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Limit negative externalities
Support positive externalities
5) Addressing ExternalitiesExternality: A side effect of production or consumption that has consequences for people other than the producer or consumer.
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Most goods and services produced in market economies are private. The consumers who purchase these goods consume these goods.Ex: Hamburger, shoes
Public goods are used collectively and no one can be excluded from using them.Ex: National defense, public parks
6) Providing Public Goods
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Nonexcludable:
NONRIVAL In Consumption:
Once a public good is produced, it is difficult or impossible to exclude others from consuming the good, even if they
didn’t pay for it.
When one person consumes a public good, it does not prevent others
from also consuming the good.
Public good have 2 characteristics:
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Free-Rider Problem: THERE IS NO WAY TO MAKE PEOPLE
WHO BENEFIT FROM PUBLIC GOODS PAY FOR THEM!
Because of this, private businesses do not have incentives to produce enough public goods.
Therefore, the government often provides them, through tax dollars, if people want them.
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Fight unemployment
Encourage price stability (reduce inflation)
Promote economic growth
7) Promoting Economic Stability
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Provide an economic safety net (to some degree)
Tax those with larger incomes and help those in need
8) Redistributing Income
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Roles of Government in a Market Economy
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Sample Placard:
What are three interesting details in this cartoon?What is happening in this restaurant? Why?What role of government does this cartoon represent?What might the cartoonist be saying about how well the government is carrying out its role in this case?
Complete the row for the sample placard on Handout 11.
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Circulate around the room to analyze the placards.
At each placard, complete the appropriate row on Handout 11.
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Trans fats are fats in food that contribute to high cholesterol. Some local governments have banned, or attempted to ban, trans fats in restaurant foods.
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