Public goods and market failure Flashcards
Why do public goods cause market failure?
Due to the problem of missing markets
If individuals had better information regarding the benefits to themselves of consuming a good or service, what would happen to the marginal private benefit curve?
The marginal private benefit curve would shift outwards.
What would happen to the equilibrium quantity if the marginal private benefit curve shifted outwards?
The equilibrium quantity would increase.
What is the most significant way which the government can correct information failure?
The government can force producers to provide accurate information.
Give an example of how government advertising campaigns can correct information failure?
Hard-hitting anti-speeding advertising campaigns can reduce the number of road accidents.
Explain how information failure leads to the over consumption of cigarettes?
People may not be fully aware of the lung problems that smoking causes. This means that people are likely to start smoking who would not have otherwise done so if all information was disclosed. The government can lower the consumption of cigarettes by running an advertisement campaign in order to correct the market failure.
What are the two attributes of a public good?
Non rival
Non excludable
