Government Intervention in Different Market Structures - AP Microeconomics

Underproduction and social benefits. Private benefits below social benefits cause insufficient production.

Increase in the external benefit. Encouraging externality improves social welfare.

A tax to correct a negative externality. Makes polluters pay for social costs imposed.

Raises equilibrium price, lowers quantity. Government levy shifts supply curve leftward.

Necessities with inelastic demand. Essential goods benefit most from cost reduction.

It creates a surplus in the market. Quantity supplied exceeds quantity demanded at the floor price.

Market distortions and inefficiencies. Artificial prices create shortages or surpluses.

It creates a shortage in the market. Quantity demanded exceeds quantity supplied at the ceiling price.

Decreases consumer surplus. Higher import prices hurt domestic buyers.

It decreases foreign competitiveness. Lower costs help domestic firms compete globally.

A cost or benefit affecting third parties. Spillover effects not reflected in market prices.

Elasticity of supply and demand. Less elastic side bears more tax burden.

A loss of total welfare due to inefficiency. Occurs when markets don't achieve allocative efficiency.

Lowers equilibrium price, raises quantity. Government payment shifts supply curve rightward.

It increases supply, shifting the curve right. Lower production costs increase willingness to supply.

It decreases producer surplus. Artificially low prices reduce producer profits.

It decreases supply, shifting the curve left. Higher production costs reduce willingness to supply.

It decreases consumer surplus. Artificially high prices increase consumer costs.

When regulators favor the industry they regulate. Regulators develop close ties with industry interests.

It reduces the monopolist's output. Higher marginal costs lead to less production.

To raise revenue and/or discourage consumption. Government charges increase costs to influence behavior.

To increase social welfare. Monopolies create deadweight loss from underproduction.

It decreases consumer surplus. Higher prices reduce consumer benefits from trade.

Overproduction and social costs. Private costs below social costs cause excess production.

The relative elasticities of supply and demand. More elastic side bears less tax burden.

Increases domestic prices of imported goods. Import taxes raise costs for foreign goods.

Increases producer surplus. Reduced foreign competition benefits domestic firms.

It increases the monopolist's output. Lower marginal costs enable increased production.

Increased prices due to limited supply. Restricted quantity drives up market prices.