Types of Market failure

Question 1

complete MF

Answer 1

market fails to S any of a D g … Missing market

Question 2

MF

Answer 2

Resources inefficiently allocated due to i’mperfection in working of the marker mechanism

Question 3

Missing market

Answer 3

market where MM fails to S any of a g

Question 4

Partial MF

Answer 4

Market for a g exist but there’s over/underproduction of g

Question 5

3 types of MF

Answer 5

• Externalities
• Under provision of public g
• Info gap

Question 6

Externalities

Answer 6

profits = accurate signals … markels allocate resources efficiently
BUT- misleading bc not reflective price & to society of eoon activities SO diff AKA externalities

Question 7

underprovision of public g

Answer 7

Public g (eg defence/ policing) underproureled bc easy to gain benefits w/o paying
→ large incentive NOT to pay in hopes som1 else Pays SO underprovided if left to FM forces

Question 8

Info gaps

Answer 8

B&S have knowledge of product in perfect market
BUT → can have imperfect info (eg C have imperfect info … make wrong choice