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Market Failure


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Market Failure
The failure for a market to produce at socially economic level, inefficient allocation of resources
Perfect Market
Perfect Competition in all goods, Consumers are able to maximize their utility
Externalities
Consumption and/or Production that affects third parties
Positive Externality
Externality that increases the benefit of third parties
Negative Externality
Externality that causes a burden in society
MPB
Share of Benefit by Individual
MSB
Sum of Benefit of all parties affected
MPC
Share of Cost of Individual
MSC
Sum of Cost of all parties affected
Government levies a tax
MSC > MPC
Government subsidies a firm
MSC < MPC
Public Goods
Goods that are non-rivalrous and/or non-excludable
Quasi Public Goods
Goods provided by private individuals
Pure Public Goods
Goods provided by the government
Merit Goods
Goods that are good for us
Level 7