11 Market failure and externalities Flashcards
1
Q
Market Failure
A
Failure of the market system to allocate resources efficiently
- externalities
- information failure
- public goods
2
Q
Externality
A
a cost or benefit to a third party that has not been taken into account in market transaction
3
Q
Positive externality of consumption
A
- Benefit to a third party that arises from the consumption of product.
- quantity is lower than optimum quantity and price is lower than optimum price
4
Q
negative externality of consumption
A
- Cost to a third party that arises from the consumption of product.
- quantity is higher than optimum quantity and price is higher than optimum price
5
Q
Positive externality of production
A
- Benefit to a third party that arises from the production of the product.
- quantity is lower than optimum quantity and price is higher than optimum price
6
Q
Negative externality of production
A
- cost to a third party that arises from the production of the product.
- quantity is higher than optimum quantity and price is lower than optimum price
7
Q
externality of consumption
A
the over or under consumption of a product
8
Q
externality of production
A
the over or under production of a product
