1.3.1 Types of Market Failure

1. Types of Market Failure: ... of public goods: Failure to produce public-goods such as Defence, Street Lighting, Lighthouses and policing. The reason for this is the free-rider problem (5, 9)

2. Types of Market failure: Misleading prices lead to a difference between true prices and profits to society of economic activity. The market puts out the wrong signal, leading to a misallocation of resources (13)
3. ... of markets: Competition leads to greater efficiency, Encouragement of innovation, Large variety of goods and services available, Encouraged economic activity and Freedom of individual choice (10)
4. Types of ... : Externalities, Under provision of public goods and Information failure (6, 7)
5. ... is a problem because resources are wasted as they are not allocated properly so the market is inefficient (6, 7)
6. Types of Market Failure: Assumptions of perfect markets include perfect knowledge, but consumers don't always have the full knowledge of what they are buying. Asymmetric information is another problem where either the buyer or seller has more info (11, 4)
7. ... is when the allocation of goods and services by the free market is inefficient (6, 7)
8. ... of markets: Wealth generates more wealth, Environmental damage results with no government regulation, A reduced social safety net and Poor working conditions (10)

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