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Unit 4: Market Failures and the Role of Government

Page history last edited by Pete Scholtes 11 years, 4 months ago

Melting polar ice caps are an example of "negative externalities" in the market economy, an environmental disaster that requires a government solution. 

 

Unit 4 summary: This unit is partly about how the market system works well, creating the most value for society. It's also about the failures of markets, and government stepping in to solve problems. After this unit, you will be able to describe "the invisible hand" of competition on the market: how prices adjust in response to lowered long-run costs, changing demand, and competition. After this unit, you will also be able to explain how a lack of perfect information, resource mobility, and government regulation can lead to monopoly, pollution, and income inequality. Finally, you'll describe how the banking system works, identify various market structures, define a public good, and answer the question: Why does government exist anyway? Total points: 150 = formative work (50) + assessment (100).  For this unit, Read: Ch. 15 sec. 3 and Ch. 16 sec. 1-2. Checklist: Civ and Econ Unit 4 Checklist.doc
 

Week 12

__Thu., Nov. 20: Unit 4 Word Find (3 points). Copy Unit 4 Terms into notebook: long-run average costs (LRAC), economic profit, normal profit, short-run equilibrium, long-run equilibrium, invisible hand, demand deposit, loan, inflation, recession, perfect competition, trust, monopoly, polyopoly, oligopoly, business cycle, monetary policy, fiscal policy, externalities, public goods, income distribution. (Show with definitions on test day for 6 points.)

 

Week 13

__Mon.-Thu., Nov. 26-29: At-home board-game project (for attendance and probability credit).

__Fri., Nov. 30: Come back to school and share board game. Check grade in Civics & Econ.

 

Week 14

__Mon., Dec. 3: Learning goals: Define LRAC, economic profit, normal profit. 1. Copy Terms into notebook if you haven't already. 2. Test review. 3. How can class run better? Review expectations, revised syllabus Civics and Econ Syllabus Final.doc, and Unit 4 Checklist: Civ and Econ Unit 4 Checklist.doc 4. Introduce Unit 4 (read summary). 5. Cost review: Cost review lecture.ppt We're going to start this unit talking about how markets work well. To get started, I wanted to review one of the tougher terms concepts from the last unit: cost. In economics, cost is not how much it costs a customer to buy a good, like a new phone priced to move on Black Friday. Cost is what it costs to make that good, like when the phone came off the assembly line in China. It's the value given up to produce a good or service. Introduce new term: long-run average costs (LRAC) 6. Curt's Tacos Lesson and intro to profits (2 points). Review opportunity cost. Assessment: Be able to define LRAC (long-run average cost), economic profit, normal profit. Terms: economic profit, normal profit. 7. Homework 1: Copy Terms into notebook if you haven't already, show copied terms for 3 points tomorrow.

__Tue., Dec. 4:  Learning goal: Define LRAC, economic profit, normal profit. 1. Review Curt's Tacos Lesson (2 points), opportunity cost, LRAC (long-run average cost), economic profit, normal profit. 2. Reading 1: Market Failures Reading 1.ppt Don't be thrown when the reading says "In Chapter 15, you learned how the Federal Reserve System controls the supply of money and regulates banks." You haven't read that chapter yet but you will after Winter Break. Reading 1: Read Section 1, "Government Intervention in the Economy," p. 346-349, and answer questions 1-5 on p. 349. (3 points)  Questions: 1. What basic economic powers did the Constitution give to Congress? 2. Name three economic problems that have cause citizens to ask government to become involved in the economy. 3. Give an example of government intervention in the economy. 4. What are two arguments against government intervention in the economy? 5. How might your life be different today if there were little government intervention in the economy?

__Wed., Dec. 5: Learning goals: Describe conditions of perfect competition. 1. Introduce "accounting profit." Profit review: Profit Review.ppt Review normal profit and economic profit. Mary and Diane examples. 2. Perfect Competition lecture. Introduction to Perfect Competition. 3. Show copied terms for 3 points.

__Thu., Dec. 6: Experiential Day (we have school, but no class). 

 

Week 15

__Mon., Dec. 10: Project Day (we have school, but no class). 

__Tue., Dec. 11: Learning goals: Define monopoly. Explain how fiscal policies (taxation, spending) affect price stability, employment, and growth. Also define trust, business cycle, monetary policy, and fiscal policy. Reading 2: Market Failures Reading 2.ppt Read p. 349-355, "Government's Efforts to Solve Economic Problems," and answer questions 2-8 on p. 355 in your notebook. Be able to answer Question 1 out loud (terms from earlier class). (3 points) Questions: 2. What are two methods government has used  to ensure fair business practices? 3. What is the purpose of the Occupational Safety and Health Administration? 4. Why have consumers asked the federal government for protection? 5. What was the purpose of the Social Security Act of 1935?  6. What can the federal government do to try to bring the economy out of a recession? 7. What environmental problems led to the creation of the Environmental Protection Agency? 8. Explain how the Great Depression helped to greatly increase government intervention in the economy. Define terms on p. 349 in your Terms. Define trust, monopoly, business cycle, monetary policy, fiscal policy. Terms: Trust: a group of companies organized to benefit from the high prices they all agree to charge. Monopoly: (not book definition) 1. one firm controlling the market, 2. producing a product with NO close substitutes, 3. with insurmountable barriers to entry. Trust: a group of companies organized to benefit from the high prices they all agree to charge. Business cycle: economy goes through it, repeated periods of growth and recession. Monetary policy: regulation of the money supply by the Federal Reserve System. Fiscal policy: a government's decisions about the amount of money it spends and collects in taxes.

__Wed., Dec. 12: Learning goal: Define short-run equilibrium, long-run equilibrium, invisible hand and the following market structures: perfect competition, polyopoly, oligopoly, monopoly. Also: Compare characteristics of various market structures; explain their impact on long-run profit, price, production, and efficiency in the market. Identify and analyze market failures caused by a lack of competition, lack of resource mobility (barriers), and lack of perfect information; evaluate the rationale and effectiveness of government attempts to remedy these problems. 1.) Invisible Hand Lesson and review of Perfect Competition. Define perfect competition ´╗┐in Terms´╗┐. Also define short-run equilibrium, long-run equilibrium, invisible hand. Vocabulary.doc   Perfect Competition: 1. many, many firms, 2. producing identical products, 3. with easy exit and entry from the industry, so that 4. profit = 0 and price = LRAC. short-run equilibrium: price reflects short-run costs. long-run equilibrium: price reflects LRAC (long-run average cost). invisible hand: pressure of competition lowering prices to LRAC and creating allocative efficiency (most value for society). monopoly: 1. one firm controlling the market, 2. producing a product with NO close substitutes, 3. with insurmountable barriers to entry. Oligopoly: 1. a few big firms, 2. producing products with some substitutes, 3. some barriers. Polyopoly: 1. many firms, 2. producing different products, 3. few barriers. 2.) Monopoly vs. Perfect Competition worksheet, Yes-Yes worksheet, introduction to market structures. Define polyopoly, oligopoly.  Learning goals: Also: Describe the impact of income distribution on markets. 3.) Market Structures Activity. (2 points).

__Thu., Dec. 13: Learning goal: Identify measures of income distribution, wealth distribution and poverty and explain how these affect, and are affected by, the economy; evaluate the effectiveness of, and incentives created by, government income redistribution programs. Also: ´╗┐Describe the impact of income distribution on markets. 1.) Vocabulary.doc Review  monopoly: 1. one firm controlling the market, 2. producing a product with NO close substitutes, 3. with insurmountable barriers to entry. Oligopoly: 1. a few big firms, 2. producing products with some substitutes, 3. some barriers. Polyopoly: 1. many firms, 2. producing different products, 3. few barriers. 2.) Review or do Monopoly vs. Perfect Competition worksheet, Yes-Yes worksheet, introduction to market structures. Make sure to correct spelling of "polyopoly."  Review or redo Market Structures Activity. (Do market structure activity with Rotation 1.) 3.) Simple Allocation Simulation, Introduction to "market failures" 4.) Pizza activity and discussion (2 points); Rotation 5 missed this. Define income distribution. Tax Cuts. 5.) When done, work on Homework 2: Tax Cuts worksheet: Tax homework.doc (3 points). 

__Fri., Dec. 14:  Experiential Day (we have school, but no class).

 

(WINTER BREAK)


Week 16

__Wed., Jan. 2: No School.

__Thu., Jan. 3: Learning goals:  Explain how the Federal Reserve's monetary policies (discount rates, reserve requirements, open market operations) affect output, employment, prices, and long-run inflation. Explain what the Fed (Federal Reserve) does. Explain how various government fiscal policies are likely to impact overall output, employment and the price level. Describe how various monetary policies of the Federal Reserve are implemented; explain how they are likely to impact overall output, employment, and the price level.  1. Banking intro: This unit is at least partly about the role of government in the economy, and one important role the government plays in any economy is one we haven't talked about yet: regulating banks. What does it mean to regulate? Control and police. Banks are a businesses. They exist to make a profit. With everyone seeking to make a profit on the market, and with all the wonderful things markets do when people compete, why would government need to control competing banks? What happens to the losers when businesses compete? They close. What happens to your money if your bank closes? It's gone. That's what happened in 1907, when the economy was doing badly and there was a panic--this was long before the Great Depression. People ran to banks to get their money, and it was gone. Why did those banks have to close? 2. Bank lecture and activity. (2 points) Add 2 Terms from p. 330: demand deposit: the money in a checking account. loan: money borrowed for a certain time period. To remember how important banks are to the economy, let's take a look again at the Circle of Economic Life, which I'd like you to practice copying today. 3. Intro to reading: So in 1913 Congress passed a bill creating the Federal Reserve System, to regulate how much money banks keep in reserve. Today you're going to be reading about the Federal Reserve, or "the Fed" (not to be confused with the Feds).  Reading 3: Market Failures Reading 3.ppt Read Section 3, "The Federal Reserve System," p. 336-341, and answer questions 1-6 on p. 341. Put definitions from 1. in your Terms. (3 points) Define: inflation, recession. + Hand out Study Guide. Inflation: a general rise in the prices of goods and services throughout the economy. Recession: a slowdown of economic activity and production. 

__Fri., Jan. 4:   Experiential Day (we have school, but no class).


Week 17

__Mon., Jan. 7: Learning goals: Explain market failures having to do with: poorly-defined or poorly-enforced property rights. Assess how these impact the environment. Summarize the benefits of natural monopolies and why government regulates them. Analyze the role of government in the economy, including consumer and worker protections, ensuring competition, stabilizing the economy, providing public goods and services, regulating business, and redistributing income. 1.) Paper Clips Activity. Take out your notebooks and your tax homework. 2.) Role of government lecture: Mon Property Rights Lesson.doc  

 __Tue., Jan. 8: Learning goal: Explain why the market can't provide public goods. 1.) Review property rights and negative and positive externalities from yesterday. 2.) Public goods review: Two Boxes Activity.  3.) Get Study Guide and Vocabulary Review. Unit 4 Study Guide.doc Unit 4 Terms Matching.doc Work on these in class. (6 points).  

__Wed., Jan. 9: Work on Study Guide. 1.) Andy Antenna lecture. 2.) Circle of Economic Life. 3.) Study Guide work and review. 4.) End of class: Current grades posted on the wall. For Rotation 5, do:  Pizza activity and discussion (2 points). Turn in homework 2. For Rotation 1, do: Two Boxes Activity. 

__Thu., Jan. 10: Market Failures Jeopardy: http://www.superteachertools.com/jeopardy/usergames/Jan201302/game1357833094.php. (2 points) UNIT 4 TEST (100 points). Unit 5 Word Find: Unit 5 Word Find.pdf .

 


Back to main Civics & Economics page.

 


Unit 4 Learning Goals:

__Describe conditions of perfect competition.

__Describe the following market structures: polyopoly, oligopoly, and monopoly.

__Summarize the benefits of natural monopolies and why government regulates them.

__Explain why market failures are caused by a lack of these things: competition, resource mobility, or perfect information.

__Explain market failures having to do with: externalities, public goods, and poorly-defined or poorly-enforced property rights.

__Assess how these impact the environment.

__Describe the impact of income distribution on markets.

__Analyze the role of government in the economy, including enforcement of property rights, consumer and worker protections, ensuring competition, stabilizing the economy, providing public goods and services, regulating business, and redistributing income.

__Explain how the Federal Reserve's monetary policies (discount rates, reserve requirements, open market operations) affect output, employment, prices, and long-run inflation.

__Describe different types of financial institutions (banks, credit unions, investment firms, cooperatives) and explain their role in the economy.

__Explain how fiscal policies (taxation, spending) affect price stability, employment, and growth. Define crowding-out.

 


Leftover learning goals for Macroeconomics (or goals to be repeated):

__(Save for personal finance) Describe different types of financial institutions (banks, credit unions, investment firms, cooperatives) and explain their role in the economy.

__Draw Circle of Economic Life and explain the role of financial institutions and credit markets in the acquisition of capital.  

__Use the Equation of exchange, MV=PQ, to show that given V (the velocity of money) is constant and Q (output) is at full employment, a percentage change in M (the money supply) will result in the same percentage change in P (the price level).
__Explain how fiscal policies (taxation, spending) affect price stability, employment, and growth.

__Define crowding-out. Explain why market failures are caused by a lack of these things: resource mobility or perfect information. 

 

Leftover lessons:

Behaving Like a Monopolist, Effect of Barriers. (2 points)

 

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