Market Failure When the market produces unwelcome outcomes

Forms of Market Failure Monopoly – One business; can set prices – Violates numerous buyers and sellers Information Asymmetry – Parties to a transaction don’t have all the information – Violates reasonably well informed

Forms of Market Failure Externality – Violates Free Entry/Exit – Positive Someone benefits without paying costs “Free Rider” e.g., finding a newspaper on the subway – Negative Someone pays costs without benefitting “Spillover” e.g., pollution

Forms of Market Failure Resource Immobility – Workers stuck in a location – e.g., plant closures Public Good – The market will not provide some service because it’s not profitable – e.g., police, education