market failure Flashcards
1
Q
market failure
A
when the free market causes an inefficient allocation of resources
2
Q
externalities
A
costs or benefits that are ignored in a market exchange
3
Q
private costs
A
costs involved that only the individual consumer or producer cares about
4
Q
external costs
A
costs from production or consumption of a good that neither producers nor consumers pay
5
Q
social costs
A
private costs + external costs
6
Q
private benefits
A
benefits involved that only the individual consumer or producer cares about
7
Q
external benefits
A
benefits that other people get, who were not directly involved in the market exchange
8
Q
social benefits
A
private benefits + external benefits
9
Q
social optimum equilbrium
A
where marginal social costs (MSC) equals marginal social benefits (MSB)
