market failure Flashcards
1
Q
Market Failure Def
A
Free market fails to allocate scarce resources at socially optimal level of output
2
Q
Negative/Positive Externalities
A
Producers/Consumers wont account 3rd party impacts - self interest
3
Q
(De)merit goods
A
Imperfect information leads to misallocation
4
Q
Public Goods
A
Free Rider problem - private firms won’t supply then as they are profit motivated
5
Q
Monopoly Power
A
High barriers to entry
One dominant seller
Higher prices than social optimum
6
Q
Factor Immobility
A
When suppliers can’t respond to the increased demand
