Market Failure Flashcards
1
Q
What is market failure
A
When there is inefficient allocation of resources in a free market.
2
Q
What are positive externalities
A
Goods / services which give benefits to a third party
3
Q
Give an example of a positive externality
A
Less congestion from cycling
4
Q
What is a negative externality
A
Goods / services which impose a cost on a third party
5
Q
Give an example of a negative externality
A
Cancer from passive smoking
6
Q
What is a merit good
A
When people underestimate the benefit of the good (may have positive externalities)
7
Q
Give an example of a merit good
A
Education
