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Microeconomics/Market failures - Coggle Diagram
Microeconomics/Market failures
Externalities
Positive externalities
Positive Production externalities
Policies to correct
Subsidies
Direct government provision
Positive Consumption externalities
Policies to correct
Education and awareness
Direct government provision
Government legislation
Subsidies
Negative externalities
Negative Consumption externalities
Policies to correct
Market based policies
Government legislation
Tax on consumers or producers
Education and awareness
Negative Production externalities
Policies to correct
Indirect (Pigouvian) taxes
Carbon taxes
Tradeable permits
Goods
Private goods (i.e. book)
Rivalrous
Excludable
Common pool resources (i.e. forests)
Non-excludable
Tragedy of the commons
Rivalrous
Public goods (i.e. street lighting
Non-rivalrous
Non-excludable
Free-rider problem
Government intervention to correct market failure to provide public goods
Direct government provision
Contracting out to the private sector
Quasi-public goods (i.e. cable TV)
Non-rivalrous
Non-excludable
Marginal social benefit (MSB)
Marginal private cost (MPC)
Marginal private benefit (MPB)
Marginal social cost (MSC)
Allocative inefficiency
Overallocation
Underallocation
Market structures
Oligopoly
Product differentiation or not
Small number of large firms
High barriers to entry
Monopolistic competition
No barriers to entry
Product differentiation
Fairly large number of SMEs
Perfect competition
Homogeneous products
No barriers to entry
Very large number of small firms
Monopoly
Unique product
High barriers to entry
Single seller
Profit maximisation
Cost of production
AC=TC/Q
MC=ΔTC/ΔQ
Profits
Normal profit
TR=TC
Abnormal profit
TR>TC
Profit
TR-TC
Loss
TR<TC
Revenues
AR=TR/Q
MR=ΔTR/ΔQ
TR=PxQ