1.3.1 - Types Of Market Failure

Question 1

What Are The Scarce Resources?

Answer 1

Factors of production.

Question 2

What Is Market Failure?
(4 Points)

Answer 2

~ When there is a less than optimum allocation of resources from the point of view of society.
~ Either over-provision or under-provision of goods and services.
~ Therefore over-allocation and under-allocation of the resources used to make these goods and services.
~ From a society’s point of view there is a lack of allocative efficiency.

Question 3

When Does Market Failure Occur?

Answer 3

When the free market fails to allocate scarce resources at a socially optimum level of output.

Question 4

What Are The 3 Main Types Of Market Failure?

Answer 4

~ Externalities.
~ Under-provision of public goods.
~ Information Gaps.