Microeconomics Other Forms of Market Failure Flashcards

1
Q

Private good

A

a good that, once consumed by one person, cannot be consumed by somebody else; such a good has excludability and is rivalrous

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2
Q

Public good

A

a good that is non-exclusive and non-rivalrous-consumers cannot be excluded from consuming the good, and consumption by one person does not affect the amount of the good available for others to consume

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3
Q

Free-rider problem

A

when an individual cannot be excluded from consuming a good, and thus has no incentive to pay for its provision

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4
Q

Merit good

A

a good that brings unanticipated benefits to consumers, such that society believes it will be underconsumed in a free market

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5
Q

Demerit good

A

a good that brings less benefit to consumers than they expect, such that too much will be consumed by individuals in a free market

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6
Q

Asymmetric information

A

a situation in which some participants in a market have better information about other market conditions than others

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7
Q

Adverse selection

A

a situation in which a person at risk is more likely to take out insurance

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8
Q

Moral hazard

A

a situation in which a person who has taken out insurance is prone to taking more risk

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