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BUAD 5500, Topic 4
The document discusses four main types of market failures: externalities, public goods, asymmetric information, and imperfect competition. It provides details on each market failure, including examples and potential solutions. For externalities, it describes negative and positive externalities in consumption and production and solutions like taxation, limits, and tradable rights. For public goods, it notes they are non-rival and non-excludable. Asymmetric information can cause issues like adverse selection, and solutions include information markets and forced consumption. Imperfect competition arises from monopoly power, pricing decisions, and sources like resources, policies, or non-homogenous goods, and solutions involve anti-trust and regulation.
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BUAD 5500, Topic 4
- 1. Market Failure andthe Government Spring 2013 Topic 4
- 2. Perfect competition Many actors Homogenousproducts No barriers to entry or exit Symmetric information No external benefits or costs
- 3. Why is thisdesirable? Consumer surplus
- 4. Why is thisdesirable? Consumer surplus Producer surplus
- 5. Why is thisdesirable? Consumer surplus Producer surplus Market efficiency
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- 8. Violation 1: externalities Negative Positive Potentialsolutions Fixed limits
- 9. Violation 1: externalities Negative Positive Potentialsolutions Taxation Tax incidence
- 10. Violation 1: externalities Negative Positive Potentialsolutions Ownership and tradable rights
- 11. Violation 2: publicgoods Non-rival Non-excludable
- 12. Violation 2: publicgoods Non-rival Non-excludable Solutions
- 13. Violation 3: asymmetric information Themarket for lemons Adverse selection
- 14. Violation 3: asymmetric information Themarket for lemons Adverse selection Possible solutions Secondary information markets Forced consumption
- 15. Violation 4: imperfect competition Monopolypower Pricing decisions MR and demand curve
- 16. Violation 4: imperfect competition Monopolypower Pricing decisions Monopoly and PC outcomes compared Dead weight loss
- 17. Violation 4: imperfect competition Typesof imperfect competition Monopoly Oligopoly Monopolistic competition
- 18. Violation 4: imperfect competition Typesof imperfect competition Sources of imperfect competition Limited resource
- 19. Violation 4: imperfect competition Typesof imperfect competition Sources of imperfect competition Government policies Patents Copyright Licensing requirements
- 20. Violation 4: imperfect competition Typesof imperfect competition Sources of imperfect competition Natural monopolies
- 21. Violation 4: imperfect competition Typesof imperfect competition Sources of imperfect competition Non-homogenous goods
- 22. Violation 4: imperfect competition Solutions Anti-trust Approaches Consumerharm Strict size limits “Chicago School”
- 23.