Lecture part 2

Question 1

______________: Necessary and beneficial commodities that private entities will not supply because there is little to no incentive

Examples: _____drugs: no profit due to small market

Vaccines-liability risk

Answer 1

Public goods

Orphan

Question 1

____________:When the production or consumption of a good affects someone who does not fully consent to the effect, and when the costs of the good are not fully incorporated in the price of the good

Example: Indiscriminate use of ______________-result is cost of increased bacterial resistance

Answer 1

Externality

antibiotics

Question 2

____________-when the fixed costs of providing a good are high relative to the variable costs of producing the good

Example: Patents and market exclusivity for new drugs

Answer 2

natural monopoly

Question 3

___________:when the consumer is uninformed about the true value of a good

Examples: Prescription only drugs; written consumer info for certain drugs

Answer 3

Information asymmetry