state provision to solve market failure

Question 1

state provision and when it can occur and examples

Answer 1

-direct provision of goods/services by the government free at the point of consumption
-occurs when there is underproduction/consumption and inequity
-healthcare, education, public goods (missing market)

Question 2

how state provision works

Answer 2

-government considers full social cost and benefit and allocates supply at q star
-goods are free at the point of consumption (p=0)
-solves underconsumption/production and inequity and missing market issue
-allocative efficiency and social welfare improvement

Question 3

graph of state provision

Answer 3

-price of healthcare/education and quantity of healthcare/education on axis
-vertical supply curve and demand curve
-p = o at the bottom

Question 4

issues with state provision when resolving market failure

Answer 4

-excess demand (qd - q star)
-cost
-imperfect info
-inefficiency of state organisations