Market Failure

Question 1

Market failure

Answer 1

• resource allocation
• what, how, how much, for whom to produce based on market eqm
• fails to achieve efficiency

Question 2

Partial market failure

Answer 2

• resource allocation thru mkt forces alone
• result in lvl of production or consumption
• less/more than what is socially desirable

Question 3

Externalities

Answer 3

• third party effects on those not directly involved in production/consumption of gd
• -ve externality: external cost
• +ve externality: external benefit