1. Chapter 3: Inefficiency Adam Brain

2. Inefficiency l Occurs in situations where optimum price and quantity are not met. l Numerous causes.

3. Timeframes l Shortrun: Static Efficiency l Longrun: Dynamic Efficiency

4. Rules for Allocation l Costs of goods and services versus benifits...measured by oppertunity costs.

5. Inefficiency in the private sector l Called market failure. Most popular example is Monopoly.

6. Nonexistant Markets l Unrealized external benifits. l Public Goods. l External costs.

7. Inocmplete markets l A market without free entry for consumers. l Best decribed by insurance exemptions.

8. Inefficiency in the public sector l Rent controls. l Agricultural Price Supports. l Government-subsidized Medical Care. l Minimum Wage. l Tax collection.

9. Tradeoffs of efficiency l Some taxes, like the cigarette tax, are cutting external costs. l Some efficiency losses are considered necessary evil, in order to maintain equity.