Mod 5 Market Failure Government Intervention

Question 1

Pure public goods?

Answer 1

Provided/funded by government

Defence, street lights, roads, parks

Question 2

Common resources?

Answer 2

These are resources available to everyone, but over use by one party reduces possible use to others and may need to be regulated.

Like: fisheries and forests

Question 3

What is a merit good?

Answer 3

A good that is beneficial to society, such goods are often provided or subsidized by government
Like: motor car seat belts, education for children aged 5-15, art galleries and museums

Question 4

What is information imperfections?

Answer 4

One party to an economic transaction has less info than the other party.

Present in many markets and results in adverse selection - taking advantage (motor vehicles and insurance are good examples)

Question 5

Market failures? Externalities?

Answer 5

When market outcomes affect parties other than buyers and sellers

These side affects are spillovers and externalities

Can cause markets to be inefficient and possibly fail
See graph 8b and 9b