T2 Market Failure Flashcards
1
Q
When does market failure occur?
A
When the price of a good as determined by the market does not lead to an efficient outcome
2
Q
What are externalities
A
Costs imposed on others not visible or part of the transaction.
3
Q
What is a marginal social cost?
A
A cost to society in addition to that imposed directly on the buyer
4
Q
What is an example of a marginal social cost
A
Pollution or environmental degradation
5
Q
What is the positive impact of government intervention?
A
When the marginal social cost is factored in to the market through the introduction of tax, minimum price floors, minimum production etc
6
Q
What is a positive externality
A
Situation with benefits that are inferred on agents were not part of the transaction.
I.e people receive a benefit
