market failure Flashcards
(10 cards)
define allocative efficiency
occurs when social surplus is maximised, and exactly the right amount of a good is produced from society’s point of view
MPB definition
the benefit received by individual consumers from consuming an additional unit of a product
MPC definition
the cost incurred by individual producers from producing an additional unit of product
MSB definition
the benefit received by society when an additional unit of a product is consumed
MSC definition
the cost paid by SOCIETY when an additional unit of product is PRODUCED
market failure definition
occurs when social surplus is not maximised in a free market
define common pool resource
resources that are non excludable and rivalrous
define negative externality of production
external costs for third parties caused by production of a product
define positive externality of consumption/production
external benefits for third parties caused by consumption/production of a product
define merit goods
goods that cause positive externalities
