(ECO 201) Chapter 8: Market Failure

a situation in which a market fails to produce the efficient level of output that maximizes total surplus

Market Failure

a market in which the demand and supply curves represent the benefits and costs to only the consumers and producers in the market

Private Market

The characteristic of some goods and services whereby the consumption of the good or service by one person reduces the quantity available for consumption by others

Rival

the demand for a good or service that reflects both the private and external benefits of its consumption is called

Social Demand

Private Demand

The demand for a good or service that considers only the private benefits of its consumption

Social Demand

The demand for a good or service that reflects both the private and external benefit of its consumption

social demand

The demand for a good or service that reflects both the private and external benefits of its consumption is called

When goods and services are nonrivalrous, the ______ of a good or service by one person does not change the quantity available for consumption by others.

consumption, purchase, or use

From an economic perspective pollution

has both costs and benefits

Any good or service that is rival and excludable

private good

Any good or service that is nonrivalrous and nonexcludable is a ______ good.

public

Any good or service that is both nonrival and nonexcludable

public good

When the consumption of a good or service by one person reduces the quantity available for consumption by others, the goods and services with this characteristic are ________ goods.

rival or private

In general, the optimal level of pollution to either prevent or to clean up occurs where

the marginal benefit of preventing pollution equals the marginal cost of preventing pollution.

A characteristic of some goods or services whereby people can be prevented, or excluded, from consuming the good oe service

Excludable

the benefit of an additional unit of a good or service that is enjoyed by people other than the direct consumer of the good or service

External Marginal Benefit

the cost of an additional unit of a good or service that is imposed on people other than the producers

External Marginal Cost

the benefit enjoyed by, or cost imposed on a third party not directly involved in the production or consumption of a good or service

Externality

A characteristic of some goods or services whereby people cannot easily be prevented from consuming the good or service, even if they don't pay for it.

Nonexcludable

When some people cannot be prevented or excluded from consuming a good or service, that good or service is said to be:

Nonexcludable

The characteristic of some goods or services whereby the consumption of the good or service by one person does not diminish the amount available to someone else

Nonrival

the benefit to the consumer of an additional unit of a good or service

Private Marginal Benefit

the cost to the producer of an additional unit of a good or service

Private Marginal Cost

Positive Externality

The unpaid benefit enjoyed by a third party not directly involved in the production or consumption of a good or service

Excludable

When people can be prevented or excluded from consuming a good or service, that good or service is said to be