Economics and Its Terrifies Essay

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Rashad Lewis Economics Week 5 1. What is the difference between private and social costs? A private cost is the cost of an economic activity directly endured by the immediate producer or consumer. A social cost is the full resource costs of an additional unit to an economic activity including the cost of externalities. 2. Explain why broadcast television is considered a public good. A public good is a product that one individual can consume without reducing its availability to another individual and from which no one is excluded. Broadcast television is a public good because producers have no ability to restrict or prevent anyone from consuming the television signal, once it is produced. 3. Provide a rationale for government provision of information. Provision of information is when the government provides information to the consumer in order for them to recognize the true costs/benefits to themselves. Provisions of information reduce over-consumption and decreases over-consumption. 4. Differentiate between a public good and common resource. Public goods are things, which can be used by the masses without diminishing their value, such as street signs and clean air. They possess the principle of non-excludability as well as are non-rival in consumption. There are not enough of common resources to serve everyone equally. Common resources face the problems of congestion or overuse. Common resources include congested roads, fishing grounds and pastures. However, both public goods and common resources are non-excludible since they are frequently overused. 5. Would a tax on prescriptions drugs be more likely to be progressive or regressive? Why? A tax on prescription drugs would most likely be regressive. Since poorer people are likely to spend a higher proportion of their income on prescription drugs. 6. A flat tax plan

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