4.1.5 Flashcards
what does over or under allocation of goods do?
cause market failure
give examples that cause market failure
poverty inequality public goods quasi public goods asymmetric information monopoly power merit goods positive externalties of production positive externalties of consumption
examples of over-allocation
negative externalities of production
negative externalities of consumption
de-merit goods
types of govt. intervention
indirect taxation state provision extending private property rights pollution permits competitive policy privatisation subsidies
what’s a homogeneous product?
consumers are indifferent between different supplier’s products
what’s a heterogenous product?
consumers can distinguish between different supplier’s products
state the factors needed for a perfectly competitive market
- large no. of buyers
- large no. of sellers
- perfect information
- freedom of entry/exit of the market
state the degrees of monopoly power from low to high
- perfectly competitive market
- monopolistically competitive
- oligopoly
- monopoly
describe perfectly competitive markets
least concentrated market
larger amount of firms providing goods
what is economic theory?
firms aim to maximise profit
what does it mean when price = marginal cost
max. sales
what does it mean when marginal revenue = output
max. sales revenue
what’s the principal/agent problem?
ownership control
define monopoly
only 1 supplier in the market
define oligopoly
a market dominated by a few large producers + many small unimportant firms
