8–13% of the AP exam. Key topics: Negative externalities in production and consumption: social cost exceeds private cost, Positive externalities in production and consumption: social benefit exceeds private benefit, Pigouvian taxes: correcting negative externalities by taxing to internalize external costs, Pigouvian subsidies: correcting positive externalities by subsidizing to internalize external benefits, Public goods: non-rival and non-excludable characteristics, free-rider problem, under-provision by markets, Common resources and the tragedy of the commons, Income distribution: Lorenz curve and Gini coefficient, Government redistribution tools: marginal tax rates, transfer payments, Government failure: unintended consequences of intervention.
Study guide content for this unit is being prepared. Check back soon for complete lesson notes, formula sheets, and worked examples.
