market failure

Question 1

what is market failure?

Answer 1

when the market forces of demand and supply fail to properly allocate resources

Question 2

what is private cost?

Answer 2

the money payed by a consumer for a good or service

Question 3

what is external cost?

Answer 3

the negative spillover effect due to the production and consumption of a good to a third party

Question 4

what is social cost?

Answer 4

the addition of external and private cost

Question 5

what is private benefits?

Answer 5

private benefits are the benefits experienced by the consumer for the production and consumption of a good or service

Question 6

what are external benefits?

Answer 6

the benefits of production and consumption experienced by a third party

Question 7

what are social benefits?

Answer 7

the addition of private and external benefits

Question 8

what are merit goods?

Answer 8

merit goods are goods deemed to have social benefits

Question 9

what are demerit goods?

Answer 9

demerit goods are goods that have a negative spillover effect in the economy

Question 10

what are public goods?

Answer 10

goods that are non-excludable and non-rivalrous that are not produced by the private sector due to a lack of profit motive