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Economics Chapter 5

market failure

what happens when markets don't function property. In some circumstances, economically desirable goods are not produced at all. in other situations, they are either overproduced or underproduced.

demand-side market failures

happen when demand curves do not reflect consumers' full willingness to pay for good or service

supply-side market failures

occur when supply curves do not reflect the full cost of producing a good or services

consumer surplus

as the difference between the maximum price a consumer is (or consumers are) willing to pay for a product an the actual price that they do pay

producer surplus

is the difference between the actual price a producer received (or producers received) and the minimum acceptable price that a consumer would have to pay the producer to make a particular unit of output available

efficiency losses (or deadweight Losses)

reductions of combined consumer and producer surplus-result from both underproduction and overproduction.

private goods

...

rivalry

...

excludability

...

public goods

...

nonrivalry

...

nonexcludability

...

free-rider problems

...

cost-benefit analysis

...

quasi-public goods

...

externality

...

coase theorem

...

optimal reduction of an externality

...

productive efficieny

is achievd b/c competition forces orange growers to use the best technologies and combinations of resources available. Doing so minimizes the per-unit cost of the output produced.

allocative efficiency

is achieved b/c the correct quantity of oranges- is produced relative to other goods and service

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