Micro Examples: Market Failure

Question 1

Negative externalities in Production

(3rd party costs when production activity

Answer 1

Manufacturing of chemicals,metals = generate air pollution

Driving cars = congestion, noise and air pollution

Resource depletion = impact on current and future generations

Question 2

Negative externalities in consumption concerns

Answer 2

Demerit goods

Question 3

Negative externalities in consumption

Answer 3

Cigarettes = passive smoking
Excessive alcoholic drinking
Excessive sugar consumption

Question 4

Positive externalities in consumption concern

Answer 4

Merit goods

Question 5

Examples of positive externalities in consumption

Answer 5

Healthcare
Education
Vaccinations
Public transport

Question 6

Positive externalities in production

Answer 6

R&D, in work training

Question 7

Public goods

Non excludable, non rival

Answer 7

Flood defences
Street lighting
Road signs

Question 8

Common access resources

Answer 8

No private ownership

Question 9

Examples of common access resources

Answer 9

Seas (minerals, sea food)
air (o2)
forests (timber)

Question 10

Policies for market failure: indirect tax

Answer 10

Cigarettes
Alcohol
Sugar
Carbon 
Fuel

DEBATING IRL:
Coffee cups, plastics

Question 11

Policies for market failure: subsidy

Answer 11

Electric cars (UK and Canada)
Solar panels
In work training 
Public transport (bus, rail)
R&D