2.8 - market failure

Question 1

Market Failure

Answer 1

An inefficient allocation of resources in a free market

Question 2

Marginal Social Cost

Answer 2

Cost to society of producing / consuming one extra unit

Question 3

Marginal External Cost

Answer 3

Cost to a 3rd party of producing / consuming one extra good

Question 4

Marginal Private Cost

Answer 4

Cost to a consumer of consuming one extra unit

Question 5

Marginal Social Benefit

Answer 5

Extra benefit to society from one extra unit of a good

Question 6

Marginal External Benefit

Answer 6

Extra benefit to a 3rd party from one extra unit of a good

Question 7

Marginal Private Benefit

Answer 7

Extra benefit received by consumers from consuming one extra G+S

Question 8

Positive externality

Answer 8

Consumption / Production of a good causes a benefit to a 3rd party

Question 9

Negative externality

Answer 9

Consumption / Production of a good causes harm to a 3rd party

Question 10

Deadweight welfare loss

Answer 10

Economic inefficiency when the economy is not in equilibrium