Market failure - Externalities

Front

Market failure is least likely in a situation with many producers competing.

Back

many producers compete in the market

Front

True statement about externalities:

Back

From society's view, output of goods with positive externalities is too low.

Front

Market failure occurs when:

Back

Third parties are affected and not compensated.

Front

Social costs > Private costs indicates:

Back

Negative externality

Front

Free market outcome: MPB, MPC, Qm, Pm; Social optimum: MSB, MSC, Qopt, Popt.

Back

MPB; MPC; Qm; Pm; MSB; MSC; Qopt; Popt

Front

In a market with positive externalities:

Back

All benefits are not internalized.

Front

When there is a negative production externality, the free market overallocates resources to the good, producing too much relative to the social optimum. This is shown by Qm > Qopt and MSC > MSB.

Back

negative; overallocate; much; Qm > Qopt; MSC > MSB

Front

Demerit goods are undesirable, overproduced, and have negative consumption externalities, leading to market overallocation of resources.

Back

Demerit; undesirable; overproduced; negative; overallocates

Front

Public goods, like defence, aren't supplied by the price system because:

Back

Benefits aren't restricted to buyers; non-buyers also gain.

Front

Characteristic of a merit good:

Back

Provided by the free market, but not in sufficient quantities.