Enhance Your Learning with Economics - Market Failures Flash Cards for quick understanding
A situation in which the allocation of goods and services by a free market is not efficient, leading to a net social welfare loss.
Costs or benefits that are not reflected in the market price of a good or service, resulting in an inefficient allocation of resources.
A beneficial spillover effect that is not fully captured by the market, leading to an underallocation of resources.
A harmful spillover effect that is not fully accounted for by the market, leading to an overallocation of resources.
Goods that are non-excludable and non-rivalrous, meaning they are available to all and one person's consumption does not diminish the availability for others.
A situation where individuals can benefit from a public good without contributing to its provision, leading to underproduction of the good in a free market.
A market structure where firms have some degree of market power, allowing them to influence prices and output levels, leading to inefficient outcomes.
A market structure with a single seller and no close substitutes, resulting in higher prices and lower output compared to a competitive market.
A market structure with a few large firms dominating the market, leading to collusive behavior and reduced competition.
A situation where one party in a transaction has more information than the other, leading to market failures such as adverse selection and moral hazard.
A situation where one party in a transaction has more information about the quality of a product or service, leading to the market being dominated by low-quality goods.
A situation where one party in a transaction has an incentive to take excessive risks or engage in harmful behavior because they are protected from the consequences.
A disparity in the distribution of income among individuals or households, leading to social and economic problems such as poverty and reduced social mobility.
A tax system where the tax rate increases as income increases, aiming to reduce income inequality by redistributing wealth from the rich to the poor.
Actions taken by the government to correct market failures and promote economic efficiency, including regulation, taxation, and provision of public goods.
Government-imposed limits on the prices of goods or services, such as price ceilings and price floors, which can lead to market distortions and inefficiencies.
Financial assistance provided by the government to individuals or businesses to encourage the production or consumption of certain goods or services.
Approaches that rely on market mechanisms, such as taxes, subsidies, and tradable permits, to address market failures and achieve desired outcomes.
A tax imposed on activities that generate negative externalities, aiming to internalize the costs and reduce the socially inefficient level of production.
A market-based approach to controlling pollution, where a limit (cap) is set on total emissions and permits to emit are traded among firms to achieve the most cost-effective reduction.
In-depth analyses of real-world examples of market failures and the policies implemented to address them, providing insights into their causes and effectiveness.
A situation where individuals, acting in their own self-interest, deplete or degrade a shared resource, leading to its eventual collapse or degradation.
The practical implications of market failures for policymakers, including the design and implementation of appropriate interventions to achieve desired outcomes.
A systematic approach to evaluating the costs and benefits of a proposed policy or project, helping policymakers make informed decisions based on economic efficiency.
A state where resources are allocated in the most efficient way, maximizing total social welfare and minimizing market failures.
The ability of a firm or group of firms to influence prices and output levels in a market, often resulting in reduced competition and inefficient outcomes.
A market structure with many firms selling differentiated products, allowing for some degree of market power but still facing competition.
A market situation where economies of scale make it more efficient for a single firm to provide a good or service, resulting in a lack of competition.
The removal or relaxation of government regulations and restrictions on markets, often aimed at promoting competition and economic efficiency.
The transfer of income from wealthier individuals or groups to poorer ones through taxation and social welfare programs, aiming to reduce income inequality.
A system where the government plays a key role in providing social and economic support to its citizens, including healthcare, education, and income assistance.
Spillover effects of market transactions that affect third parties who are not directly involved in the transaction, leading to market failures.
Collaboration between the government and private sector entities to jointly provide goods or services, combining the strengths of both sectors.
Financial or non-financial rewards or penalties designed to motivate individuals or firms to behave in a certain way, influencing market outcomes.
Factors that prevent markets from operating efficiently, such as government interventions, monopolies, and externalities, leading to suboptimal outcomes.
A state where resources are allocated in a way that maximizes total social welfare, taking into account both consumer and producer surplus.
A state where the quantity demanded equals the quantity supplied, resulting in an efficient allocation of resources and no market failures.
Factors that prevent markets from achieving perfect competition and efficient outcomes, such as information asymmetry and barriers to entry.
Obstacles that make it difficult for new firms to enter a market, limiting competition and potentially leading to market failures.
A situation where regulatory agencies, intended to protect the public interest, are influenced or controlled by the industries they are supposed to regulate.
A state where resources are not allocated in the most efficient way, resulting in deadweight loss and a net social welfare loss.
The study of how individuals and groups make decisions in the public sector, taking into account self-interest and the incentives they face.
The pursuit of economic gain through activities that do not create value, such as lobbying for government favors or seeking monopoly privileges.
Approaches that rely on market forces and competition to address market failures, without significant government intervention.
The act of individuals or firms trading goods or services willingly, based on mutual consent and perceived benefits, leading to efficient outcomes.
The forces of supply and demand that determine prices and allocate resources in a market, guiding efficient resource allocation.
Unintended consequences of economic activities that affect third parties, either positively or negatively, leading to market failures.
The study of how individuals and groups make decisions in the public sector, taking into account self-interest and the incentives they face.
Government-imposed rules and restrictions on market activities, aiming to promote fair competition and protect consumers.
Situations where the free market fails to allocate resources efficiently, leading to suboptimal outcomes and the need for government intervention.
The interaction of supply and demand in a market, determining prices and quantities of goods and services exchanged.
The characteristics and organization of a market, including the number of firms, barriers to entry, and the degree of competition.