Market Failure 4.1.8.2

Question 1

What is market failure

Answer 1

When the price mechanism leads to a misallocation of resources, leading to a loss of economic and social welfare

Question 2

What are the 4 causes of market failure?

Answer 2

Negative externalities
Positive externalities
Public goods
Information gaps

Question 3

What is partial market failure

Answer 3

When the free- market functions, but the wrong quantity are produced/consumed - there is a misallocation of resources

Question 4

What is an example of partial market failure and why

Answer 4

Healthcare - if the govt didn’t provide a healthcare system, only those with the ability to pay would have access to healthcare

Question 5

What is complete market failure

Answer 5

Occurs when a market does not exist for a good/ service - there is a missing market