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enforces "rules of the game"
- maintains legal environment for business
- protects private property
- enforce legal contracts
- advertising laws/consumer safety
prevent monopolies which when improperly utilized results in inefficiency.
regulates natural monopolies
single firm can serve a market most effeciently; economies of scale
provides public goods
goods that nonpayers cannot be excluded from. leads to free rider dilemma and profitability problems.
deals with externalites
outside of market economy; positive and negative
provides for social justice
fair distribution of income or economy; redistribution in name of fairness
promotes full employment, stable prices, and high rate of growth
employment act of 1946 - gvmt to ensure by fiscal policy(spending and taxation) and monetary policy(money supply and interest rates)
deals with problem that "individual goods can be collective bads"
falacy of composition; convienence v longterm value
ways in which the gvmt deals with market failure
market failure is when the economy overproduces or underproduces certain goods
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