marginal analysis and market failure

Question 1

two types of market failure

Answer 1

complete- when the market simply does not exist
partial- market functions but produces incorrect quantity of good or service

Question 2

private goods

Answer 2

rival and excludable

Question 3

private property rights

Answer 3

exclusive authority to determine how a resource is used

Question 4

public goods

Answer 4

non excludable, non rival and non-rejectability

Question 5

free rider problem

Answer 5

occurs when non excludability leeds to situation in which not enough consumers choose to pay for the good

Question 6

quasi-public goods

Answer 6

methods can be used to exclude free riders
e.g roads can be converted into private roads

Question 7

allocative efficiency

Answer 7

P=MC

Question 8

MC of providing a public good to another

Answer 8

0

Question 9

allocatuve effiency of public goods

Answer 9

0

Question 10

what do govt provide to correct market failure

Answer 10

public goods e.g. NHS

Question 11

examples of public bads

Answer 11

emmission of pollution
fly tipping rubbish

Question 12

govt corrections for public bads

Answer 12

removing hjousehold wastew from their bins using money from taxes

Question 13

private benefit maximisation occurs when

Answer 13

MPB=MPC

Question 14

social benefit maximisation occurs when

Answer 14

MSB=MSC

Question 15

allocatively efficiency occurs when

Answer 15

there are competitive markets for all goods and services
no economies of scale
markets simultaneuosly in equillibrium

Question 16

when does proft max occur in a perfectly competitive market

Answer 16

when P=MC and also P=MSC

Question 17

what does the vertical distance show between MSC and MPC

Answer 17

deadweight welfare loss

Question 18

what has to happen top price if their is an over production

Answer 18

price must increase