2.8 MARKET FAILURE-EXTERNALITES AND COMMON POOL RESOURCES

Question 1

Externalities

Answer 1

When third parties are affected by the benefits and costs involved in producing or consuming a particular good.

Question 1

5 TYPES OF MARKET FAILURES

Answer 1

1. Externalities
2. Common Pool or Common
3. Access Resources
4. Public Goods
5. Asymmetric Information
6. Market Power

Question 2

Negative externalities of production

Answer 2

MSC>MSB

Question 3

Positive externalities of production

Answer 3

MSC<MSB

Question 4

Negative externalities of consumption

Answer 4

MSC>MSB

Question 5

Positive externalities of consumption

Answer 5

MSC<MSB

Question 6

Negative externalities of production Government Solutions

Answer 6

1. LEGISLATION
2. CARBON TAX
3. TRADEABLE EMISSION PERMIT

Question 7

Negative externalities of consumption Government Solutions

Answer 7

1. INDIRECT TAX
2. REGULATION OR BAN
3. NEGATIVE ADVERTISING

Question 8

Positive externalities of production Government Solutions

Answer 8

1. Subsidies
2. Direct Government Provision

Question 9

Positive externalities of consumption Government Solutions

Answer 9

1. Subsidies
2. Direct Government Provision
3. Positive Advertising
4. Compulsory Legislation

Question 10

Common Pool Resources

Answer 10

Resources that are rivalrous but non-excludable.

Question 11

Rivalrous

Answer 11

A good when consumed, cannot be consumed by another person.

Question 12

Non-excludable

Answer 12

A good that someone cannot be excluded or prevented from using.

Question 13

Government Responses to Sustainability Threats

Answer 13

Sustainability is of great importance on a national and global level. These resources are not owned by one country, and therefore, international cooperation is key.