Government's Role in Market Economy

The video reviews the government's role in a market economy, highlighting its limited but crucial functions. It provides the legal structure, maintains competition, redistributes income, and reallocates resources. The government ensures legal status for businesses, protects property rights, and enforces contracts. It also maintains competition by preventing monopolies and redistributes income through taxation and transfer payments. Additionally, it reallocates resources by addressing externalities and providing public goods.

What is one of the primary roles of the government in a market economy?

• To control all businesses

• To provide a legal structure

• To eliminate all taxes

• To set prices for all goods

How does the government ensure fair competition in the market?

• By eliminating all forms of taxation

• By engaging in antitrust activities

• By allowing monopolies to flourish

• By setting fixed prices for all products

What is an example of income redistribution by the government?

• Providing free luxury cars

• Implementing a flat tax rate

• Eliminating all social security benefits

• Funding public schools with tax revenue

How does the government address negative externalities like pollution?

• By ignoring them

• By providing free resources to polluters

• By taxing them heavily

• By subsidizing polluting industries

What is a positive externality mentioned in the video?

• Traffic congestion

• Secondhand smoke

• Education

• Pollution

What is the government's role in reallocating resources?

• To ignore externalities

• To fund only negative externalities

• To address externalities and public goods

• To privatize all public goods

How does the government support positive externalities?

• By privatizing them

• By taxing them

• By ignoring them

• By subsidizing them

Why are streetlights considered a public good?

• They are only used by taxpayers

• They are privately funded

• They are shared consumption

• They are excludable

What characteristic makes a good likely to be provided by the government?

• Excludability

• Limited availability

• High cost

• Shared consumption

Which of the following is NOT a reason for the government to provide a good?

• It is shared consumption

• It benefits society as a whole

• It is a finite tangible good

• It is non-excludable