8.6 - market imperfections Flashcards
1
Q
What is the effect of imperfect/asymmetric information?
A
in imperfect markets, there is imperfect info, firms may even be tempted to collude which creates producer sovereignty which is a market failure.
this distorts the market .
2
Q
what type of market is prone to asymmetric information?
A
imperfect markets
3
Q
Why does the existence of a monopoly lead to market failure?
A
monopolies restrict market output to induce a shortage which pushes prices up, forcing consumers to pay more (exploitation).
4
Q
What is the immobility of labour?
A
the inability of labour to move from one job to another
5
Q
What causes immobility of labour?
A
occupational reasons (being under qualified) or geographical reasons (costs of moving to another part of the country)
