Lost in Translation
This scenario occurs when demand curves do not reflect consumers' full willingness to pay for a good.
What is a demand-side market failure?
Causes demand-side market failures.
What are positive externalities?
Term describing why private companies can not produce public goods.
What is free-riding?
The production of a good in the least costly way.
What is productive efficiency?
Term describing how sellers can keep people who do not pay for a product from obtaining it benefits.
What is excludability?
Result of a quantity produced being less than or greater than the efficient quantity.
What is a deadweight loss (or efficiency loss)?
Condition where one person's consumption of a good does not preclude consumption of the good by others.
What is nonrivalry?
What are public goods?
The 3rd condition required to achieve allocative efficiency in addition to 1. MB = MC and 2. Maximum willingness to pay = minimum acceptable price
What is total surplus is maximized?
A means to correct the under allocation of resources.
What is a subsidy?
This occurs when a company's factory pollutes a nearby river and does not pay for the damage it causes.
What is a supply-side failure?
The point representing the optimal reduction of an externality occurs at this intersection.
What is society's MC = MB?
The theory that states that under the right conditions, private individuals can negotiate their own mutually agreeable solutions to externality problems.
What is the Coase Theorem?