Market Failure Flashcards
(6 cards)
1
Q
Define market failure
A
When the price mechanism leads to an inefficient allocation of rescources and a loss of economic wellfare
2
Q
Name me some reasons for market failure
A
Negative Externalities
Positive Externalities
Imperfect information or information failure
3
Q
What is a negative externality
A
When social cost of production exceeds the social cost
4
Q
What is a positive externality
A
When social benefit of consumption to exceed the private cost
5
Q
What is imperfect information/information failure
A
When merit goods are under-produced while demerit goods are overproduced or or over-consumed
6
Q
What are public goods
A
Public goods are non-excludable and non-rivalrous
