market failure
- Created by: jacksie
- Created on: 06-05-21 20:19
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- Market Failure
- externalities
- negative externalities arise when
- private benefits exceed social benefits
- social costs exceed private costs
- private benefits exceed social benefits
- demerit goods
- goods with negative externalities
- merit goods
- positive externalities
- production and consumption
- market does not reflect social costs or benefits
- negative externalities arise when
- public goods
- these goods are not provided in a market economy
- non-rivalrous
- consumption of the good does not reduce anohter consumption
- non-excludability
- once provided no person cannot be excluded from benefitting
- non-rivalrous
- free rider problem
- one who recieves the benefits
- allows others to pay for it
- one who recieves the benefits
- quasi-public goods
- roads
- tolled
- they are excludable
- non-rival
- one motorists does not reduce consumption of another
- revenue does not outweigh cost
- state provision
- tolled
- roads
- these goods are not provided in a market economy
- information gaps
- information asymmetry
- buyer or seller knows more information
- George Akerlof
- second hand cars
- argued that market would collapse
- consumers would not pay for above average car as they are prepared to pay average
- consumer protection laws
- road worthy
- mileage, age
- argued that market would collapse
- second hand cars
- moral hazard
- when an economic agent
- bank
- make a decision in their best interest
- with potential risks
- if problems result, the cost is partly borne by other agents
- when an economic agent
- information asymmetry
- monopoly
- one firm dominates the market share
- sources of monopoly power
- barriers to entry
- legal
- pharmacies
- resources
- Untitled
- legal
- capital costs
- car manufacturing
- product differentiation
- anti-competitive action
- economies of scale
- purchasing economies
- in greater volumes the per unit cost is lower
- marketing economies
- greater volume of ads the lower the costs
- financial economies
- larger firms easier to raise investment
- managerial economies
- greater efficiency
- specialist staff
- greater efficiency
- technical economies
- purchasing economies
- barriers to entry
- benefits
- invention and innovation
- can invest
- creative destruction
- can invest
- natural monopolies
- lower prices
- invention and innovation
- factor immobility
- land lobaour or capital
- land
- train once built
- housing market
- prices may be higher in low unemployment area
- skills
- coal miner
- Untitled
- coal miner
- land
- land lobaour or capital
- externalities
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