1.3 Market Failure Flashcards
What is a Market Failure
The misallocation of resources within the free market
Name 4 different types of market failures
-Positive externalities
-Negative externalities
-Public goods
-Information gaps
-Inequality
-Abuse of monopolies
What is the realtionship between MSC, MPC, MEC
(Marginal Social Cost, Marginal Private Cost, Marginal Exernital Cost)
MSC = MEC + MPC
What is the relationship between MSB, MPB, MEB
(Marginal Social Bene, Marginal Private Bene, Marginal Exernital Bene)
MSB= MEB + MPB
What is the Marginal Private Cost
Cost created by the seller and buyer in transaction
What is the Marginal Private Benefit
Benefits gained by consumer and producers in the transaction
What is the Marginal Exertnal Cost
Cost to the third party
What is the Marginal Exertnal Benefits
Benefits gained by a third party
What is the Marginal Social Cost
TotalCost to society from a consumption of a good
What is the Marginal Social Benefit
The Total benefits to society from consumption of a good
What is a public good
A good which is non exludable and non rivalrous
What is a free rider
Somone who gains benwfits with out paying for the good
What is a private good
A good which is rivalrous and excludable
What is Aymmetric Information
When one party has more or less infomation than another within a transaction
What is Symmetric Information
When bother parties have the same amount of information within a transaction
