Chapter 16 Flashcards
1
Q
What is market failure?
A
Where there is a misallocation of resources in the market
e.g
partial market failure - over/underproduction of goods
complete market failure -markets not existing leading to no production
2
Q
What are externalities?
A
When prices and profits give misleading signals about the state of the market
3
Q
What is “underprovision” of public goods?
A
The market may underprovide or even fail to provide certain (public good)
4
Q
What are information gaps?
A
Consumers may not have perfect information and may make under-informed decisions
Asymmetric decisions may occur, where the buyer or seller has more information than the other.
