(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