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Flashcards in Market failure Deck (10)
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1
Q

3 types

A
  1. externalities
  2. public goods
  3. information gaps
2
Q

externalities

A

spill over
third party
economy activity
outside market transaction

they are the (negative / positive) spill-over effects on a third party resulting form an economy activity outside a market transaction

3
Q

private _

A

incurred by an individual or firm
result of economic activity
internal to market transaction
taken into account by price mechanism

the cost / benefit incurred by an individual or firm as a result of an economic activity which are internal to a market transaction and therefore taken into account by the price mechanism

4
Q

government failure

A

when government intervention to correct market failure leads to no change or net reduction in social welfare

5
Q

government intervention

A

to correct market failure so markets work more effecienly and less welfare is lost

6
Q

negative externalities in production

A
  1. two supply curves - bottom one is MPC
  2. demand curve is MPB = MSB
  3. where MPC meets MPB = qe (free market)
  4. when qe meets MSC = triangle of area of welfare lost
  5. y = costs, benefits / x= output
7
Q

positive externalities in consumption

A
  1. two demand curves - bottom one is MPB
  2. supply curve is MPC = MSC
  3. where MPB meets MPC= qe (free market)
  4. when qe meets MSB = triangle of area of welfare lost
  5. y = costs, benefits / x= output
8
Q

public good

A

non excludable non rivalrous

9
Q

GOV FAILURE

A
Inadequate info 
Cost and opportunity cost
Administration failure
Unintened consequences
Self interest
Expertise
10
Q

gov intervention

A
indirect tax
subsidies
maximum price
minimum price
tradable pollution permits
state provision of information
regulations