Market Failure
Quiz yourself by thinking what should be in
each of the black spaces below before clicking
on it to display the answer.
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| show | Market fails to create a perfect outcome making it economically inefficient. Positive Deadweight Loss at free market level of trade. Free market outcome is inefficient.
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| show | Market is failing to produce and consume the quantity of the good which maxims total social surplus
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| What are the four major sources of market failure that we identified in class? | show 🗑
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| Monopoly | show 🗑
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| Market Power | show 🗑
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| Why can some firms raise their prices without fear, but other firms have to charge the market equilibrium price? | show 🗑
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| Public Good | show 🗑
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| Private Good | show 🗑
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| In what way is a good either rival or non-rival in consumption? | show 🗑
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| show | A pizza is rival because when you eat it, the slice isn’t available for someone else. A firework show is non rival because tons of people can watch it.
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| In what way is a good either excludable or non-excludable? | show 🗑
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| show | A pizza would be excludable because you can refuse the pizza to someone who doesn’t pay. A firework show would be non-excludable because you cant prevent someone else from enjoying the display.
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| show | Can’t find a way to make the public goods excludable.
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| show | They consume goods but don’t pay. They would abuse a public good in a free market because they wouldn’t pay, but would consume the good.
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| show | No because they are public goods and non excludable
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| Common Good/Common Resource | show 🗑
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| show | Shares a characteristic with each both a private and public good
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| show | Fish in the ocean because if a fisherman catches a fish, its one less fish for another, but there’s no way to keep fisherman out of ocean making the fish rival and nonexcludable.
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| Can private firms protect a common resource? Why? | show 🗑
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| Tragedy of the Commons | show 🗑
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| What causes Tragedy of the Commons? | show 🗑
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| Why do we have to turn to government to solve the Tragedy of the Commons? | show 🗑
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| show | Situations where third parties to a market transaction are affected by the activities of others
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| Negative Externality | show 🗑
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| Example of negative exernality | show 🗑
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| Positive Externality | show 🗑
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| Example of positive externality | show 🗑
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| What are the market solutions to externalities? | show 🗑
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| show | Same thing but Ronald Coase came up with them
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| What are the public solutions to externalities? | show 🗑
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Created by:
MikalahQuillen
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