Market Failure

Which of the following is NOT a cause of market failure

• The provision of public goods

• Perfect competition

• The provision of merit goods

• Externalities

• Monopoly

This means that consumption by one person does not reduce the consumption by another persons.

• Non-Rivalrous

• External cost

• Non-excludable

• Freeriders

This is the fact that consumption of a public good cannot be confined to those who have paid for it.

• Non-Rivalrous

• External cost

• Non-excludable

• Freeriders

Efficient allocation of resource is where:

• P = VC

• P < TC

• P = MC

• P < MC

Which of the following is an example of a public good?

• A lighthouse

• The public transport (bus or train)

• Water to homes

• A coca cola

A free good has:

• An opportunity cost

• No opportunity cost

• Excludability

• Has a price

We may minimize market failure related to a public good by:

• Restricting access to only those who pay

• Excluding those who want to freeride

• Providing the good using taxation revenue

• Depending on the private sector to supply it

TWO ANSWERS ARE CORRECT: Market failure occurs:

• The free market fails to open on time

• Free markets fail efficiently allocate resources

• Price mechanism is NOT low enough for all consumers to afford the good

• Price mechanism fails to account for all costs and benefits associated with consumption of a product

Products where social benefits to the community outweighs the private benefits to the consumer:

• Merit goods

• Demerit goods

• Public goods

• Economic goods

Products that the government feels that people will under-consume and suppliers over supply:

• Merit goods

• Demerit goods

• Public goods

• Economic goods