1.3 Market Failiure Flashcards
(20 cards)
What is marginal private benefit?
Benefits gained by consumers and producers in a transaction.
What is marginal external benefit?
Benefits gained by a third party.
What is marginal social benefit?
Total benefits to society if the production or consumption of a good.
What is market failure?
Any time that the government have to intervene it is a market failure sign ( when there is a misapplication of materials)
What are 6 things that can be described as market failure?
Negative externality’s
Positive externality’s
Public goods
Information gaps
Abuse of Monopoly money
Inequality
What is the relation with MPB MEB and MSB?
MSB=MPB+MEB
What is marginal private cost?
Costs incurred by the seller and buyer in the transaction.
What is marginal external cost?
Costs incurred by the third party.
What is marginal social cost?
The total costs to society of consumption or production of a good.
What is the formula of MPC MEC and MSC?
MSC=MEC+MPC
What is a third party?
A party that is not part of the transaction.
What is consumption externality?
Where external cost is created when a product is consumed.
What is production externality?
Where the external cost is created when a good is produced.
What is negative externality?
When a good causes external costs to a third party from production or consumption.
What is positive externality?
When the consumption or production of a good creates a benefit for the third party.
What is ‘non rival’?
The consumption of one person does not limit the consumption by others.
What is ‘non-excludable’?
If a good is available for one person it is available for everyone.
What is a quasi public good?
When a good has either non rivalry or non excludable..
What is the free rider problem?
The market will fail as people are unwilling to pay for a product and it won’t be supplied as it isn’t profitable for businesses.
What is the difference between symmetric and asymmetric information?
Symmetric information is when both the consumer and producer have the same knowledge and information however asymmetric information is when the producer knows more than the consumer.
