Market Failures
A situation where the free market fails to satisfy society's wants. (Where the invisible hand doesn't work.)
What is a market failure?
This philosopher/historian believed that capitalism exploited workers
Who is Karl Marx
the local electric company is an example
What is a monopoly?
A price ceiling goes here on the supply and demand graph
What is below equilibrium?
According to Bastiat, a good economist should think of consequences both seen and this
What is unseen?
Individuals who benefit without paying, and the reason the free market doesn't provide public goods
What are free riders
Adam Smith believed that the division of labor helped this demand shifter
What is productivity?
companies like Pepsi, McDonalds and MattressFirm would be a part of this market structure
Monopolistic Competition
government subsidies do this to supply
What is an increase to supply?
This was the example that Bastiat used to show an example of unintended consequences
What is the parable of the broken window?
Smoking cigarettes in public would be an example of this type of market failure
What is an externality?
The price floor of minimum wage goes here on the labor supply and demand graph
What is above equilibrium?
products are perfect substitutes for each other, firms are price takers
perfect competition
Due to the ceiling being below equilibrium, price ceilings can create this
What are shortages?
This effect, named after a famous actress and singer describes when an attempt to censor something draws more attention to it
What is the Streisand Effect?
The key characteristic of the market that monopolies take away
What is competition?
This demand shifter is when the price of what is being produced changes
What is derived demand or the price of outputs
These are some examples of non-price competition
Brand Names and Packaging
Product Attributes
Service
Location
Advertising (Two Goals)
A type of tax created to discourage a behavior
What is an excise tax?
This industry has been positively effected by unintended consequences
What is the pharmaceutical industry?
What key piece of legislation was created to combat monopolies?
Sherman Anti Trust act
The labor supply shifter for a graph about lawyers when fewer students attend law school
What is education and training?
Companies in this market structure: Cargill, Tyson, Hormel
What is an oligopoly
We discussed this law going into effect in California the next ten years as an example of government regulation
What is a ban on new gas powered cars
An unintended consequence of raising the minimum wage is this
What are higher prices, unemployment?