Market Failure
What is the condition for allocative efficiency?
MSB = MSC
What is a rivalrous good?
A good that once you consume it, someone else cannot. Your use means the good is not consumable for another.
MR stands for
marginal revenue
Define a monopoly
A market structure where there is only one seller or producer providing a good or service.
Define an externality.
When something you do (producing or consuming) has an effect (positive or negative) on a third party.
A common pool resource is both ___________________ and _____________________.
- rivalrous
- non-excludable.
Define marginal cost.
Marginal costs are the costs you incur from producing one extra unit of a good
Write the four conditions for a perfectly competitive market.
Firms are price takers (they have no market power)
There are many buyers and sellers
Products are basically identical or very similar
Firms all have very small market share (they are small)
The following is a ________________ externality of ____________________.
https://docs.google.com/document/d/1jYp2uGs7TXMY9jEJoIKbhCiKywKORzl0sx2bYRY3_uw/edit?usp=sharing
negative externality of production
Give two examples of a public good
- healthcare
- education
Profit = TR - TC
- patent
- licensing
- high fixed/start up costs
Which line in the graph is the market demand curve and which is the market supply curve?
https://docs.google.com/document/d/1jYp2uGs7TXMY9jEJoIKbhCiKywKORzl0sx2bYRY3_uw/edit?usp=sharing
MPB = Demand curve
MPC = Supply curve
The tragedy of the commons is most associated with what type of good?
Common pool resources/common access resources
TR = Price x Quantity
How is monopoly worse than perfect competition?
- higher prices
- lower quantities
Point B on the graph is the _______________ point, and point A on the graph is the _________________ _____________________ point.
A = socially optimal point
B = equilibrium point
What is the fundamental problem associated with public goods?
Underproduction - they are not provided by a free market, and must be provided via some form of intervention.
Give two examples of a fixed cost
- rent
- utility bills
Which letter is reflects the profit maximizing quantity for the firm?
https://docs.google.com/document/d/1jYp2uGs7TXMY9jEJoIKbhCiKywKORzl0sx2bYRY3_uw/edit?usp=sharing
C