L10

Question 1

What is market failure? Name 4 examples

Answer 1

An economic situation in which there is an inefficient distribution of goods in the free market. Not pareto optimality
1. Externality
2. Public goods
3. Imperfect information
4. Market control

Question 2

What is externalities in the context of market failure?

Answer 2

A third party is affected by someones consumption or production (ex. vaccine)

Question 3

Name the three types of public goods

Answer 3

1. Non-rival: Consumption by one individual does not affect the consumption for another (ex. street lightning)
2. Non-excludable goods: Benefits avalible for all, ex national defence
3. Consumed jointly: ex, national defence

Question 4

When can government failure occur, and what is it?

Answer 4

It is when the intervention does not strive to improve pareto efficiency
1. When the government has imperfect knowledge about consumption of health care
2. When the government has imperfect knowledge about production of health care