Market Failure

A market failure is best described as

• The idea that market forces of supply and demand always provide the maximum benefit for society
• The idea that market forces of supply and demand do not always provide the maximum benefit for society
• The concept that a decision made by one party can have negative effects on another party
• The concept that a decision made by one party can have positive effects on another party

The benefits experience by the producer and/or consumer directly involved in an economic transaction.

• Private costs

• External costs

• Private benefits

• External benefits

The benefits received by third parties.

• Private costs

• External costs

• Private benefits

• External benefits

The negative effect received by third parties

• Private costs

• External costs

• Private benefits

• External benefits

The costs borne by the producer or consumer directly involved in a transaction

• Private costs

• External costs

• Private benefits

• External benefits

The benefit your neighbor receives from hearing you play your pleasant music

• Private costs

• External costs

• Private benefits

• External benefits

The annoyance of your neighbor because she doesn’t like your achingly conventional music

• Private costs

• External costs

• Private benefits

• External benefits

The price you pay for a security system for your home

• Private costs

• External costs

• Private benefits

• External benefits

The safety you enjoy as a result of having the security system

• Private costs

• External costs

• Private benefits

• External benefits

The extra safety your neighbor might experience because criminals tend to stay away from neighborhoods that have a lot of burglar alarms

• Private costs

• External costs

• Private benefits

• External benefits