Market Failure Flashcards
Market Failure
state of a market in which an economically efficient outcome is not achieved.
Externality
A consequence of production or consumption which falls on third parties without their consent.
Negative Externality
Creates Marginal Social Cost – SHIFT SUPPLY LEFT
Positive Externality
Creates Marginal Social Cost – SHIFT DEMAND RIGHT
Marginal Cost
The amount by which total cost increases as a result of producing one additional unit
Marginal Benefit
The amount by which the total benefit to an individual (or society) increases as a result of consuming one additional unit.
Rival
A characteristic of a good or service wherein consumption by one individual reduces the quantity or quality of the good or service for all remaining consumers.
Excludable
A characteristic of a good or service wherein the producer can deny consumers access, preventing consumption.
Private Goods
Excludable and Rival
Common Resources
Rival and Non-Excludable
Public Goods
Non-Rival and Non-Excludable
Quasi-Public Good
Excludable and Non-Rival
