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Market Failure, government intervention - Coggle Diagram
Market Failure
causes
externalities
- negative externalities from production (petrochemicals)
- negative externalities from consumption (tobacco)
- positvie externalities from consumption (education)
- positive externalities from production (R&D)
information failure
imperfect information
- over-allocation of resources (SSB)
- under-allocation of resources (health screening)
asymmetric information
- adverse selection (insurance)
- moral hazard (insurance)
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market dominance
- allocative inefficiency
- productive inefficiency
- dynamic inefficiency
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overview
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problems
- inefficiency in resource allocation
- inequitable distribution of income
efficiency
- allocative efficiency
- productive efficiency
- dynamic efficiency
(free market)
- PE
- AE
-DD & SS framework: sum of PS and CS max, P=MC
-MSB=MSC
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government intervention
policies
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factor immobility
- occupational immobility (training schemes)
- geographical immobility (improve transport network)
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other policies
- price control in market for necessities (increase equity)
- government provision (increase equity)
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government failure
- unintended consequences not addressed
- imperfect information
- inefficiency of government intervention
- time lags
- shifts in government policy
- rent seeking
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