Externalities, public goods, asymmetric information and market power

What this note covers

1. Market failure: when the market outcome is not the efficient outcome
2. Negative production externalities: the MSC and MPC diagram
3. Worked example: pricing the deadweight loss at Rivergum Tannery
4. Positive consumption externalities and undersupply
5. Public goods and the free-rider problem
6. Asymmetric information: moral hazard and adverse selection
7. Uncompetitive markets as a source of market failure
8. How market failure is examined and what separates a top response

8 sections · 12 key terms & formulas · 6 common mistakes