Market Failures

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Market Failures
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Pop Quiz

• 1.) List three types of monopolies?
• 2.) List the 4 types of market structures
  discussed in class.
• 3.) There are more monopolies than oligopolies in
  our society.
• True / False
• 4.) A market with 2 or three sellers and lots of
  buyers is called ______________
• 5.) A market with lots of sellers and buyers and
  identical products is considered ____.

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• 6.) What is the one difference between perfect
  competition and Monopolistic Competition?
• 7.) Which of the following is best associated
  with Monopolistic competition?
• a. Price fixing b. Product differentiation c.
  Identical Products d. Small of sellers
• 8.) What type of market structure do consumers
  want most to insure the cheapest products?
• 9.) If you own a business what type of market
  structure do you want?
• 10.) Which of the four market structures
  discussed is the most common in our society?

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Market Failures

• Market Failure
• The market fails to sustain itself.
• Usually because one of the following isnt true
• Not enough competition
• Buyers and sellers arent informed enough
• Resources arent free to move from industry to
  industry
• Prices dont reflect the cost of production

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• Inadequate Competition
• Larger but fewer firms results in
• Waste of resources
• Higher prices and reduced output
• Political power
• Inadequate Information
• Information on jobs and prices is hard to find.
• How would this hurt the market?
• Resource Immobility
• Land, labor, capital dont easily move from one
  market to another.
• Workers dont want to move.

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Externalities

• Unintended side effect that either benefits or
  harms a third party not involved in the activity
  that cause it.
• Seen as a market failure because their cost is
  not reflected in the market price.

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• Negative Externality
• Harm, cost or inconvenience suffered by a 3rd
  party because of actions by others.
• Example Airport built, homes around have to deal
  with the noise.
• Positive Externality
• Benefit received by third party even though they
  have nothing to do with it.
• Example Because of the new airport restaurants
  sell more meals.

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Pg 183 2,3,4,5 Provide Examples.

• Government solutions to market failures.
• What are anti-trust laws?
• Laws that protect against monopolies and protect
  competition. Try to prevent market failures
  caused by Inadequate Competition.
• Prevent Price Fixing and Price Discrimination.
• What is Public Disclosure?
• Requirement of businesses to reveal info to the
  public. Prevents market failure caused by
  Inadequate Information.

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Pop Quiz 2

1. A market with one seller.
2. A market with 2-3 sellers and lots of buyers is
   an example of _____________.
3. What market structure would promote both product
   variety and low prices?
4. Anti-trust laws are designed to prevent which of
   the four market types.
5. When a business makes a third party pay the cost
   of production it is called an _____.

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• 6. Public Disclosure prevents which of the four
  reasons why markets fail?
• 7. A seller who sales their product to one
  retailer for less than others is practicing
  _________ . Ant-trust laws try to prevent this
  so there is an even playing field.
• a. Price discrimination b.
  market fixing c. what?
• 8.) Which market structure would be most likely
  to fail?
• 9.) An example of non-price competition would
  be
• a. Giveaways b. Sponsorships
• c. Advertisements d. all of the above
• 10.) List three of the four types of monopolies.

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Movie Wal-mart

• 1.) List and explain 5 interesting things from
  the film.
• 2.) What market structure is Wal-Mart an example
  of? Explain.
• 3.) What are some positive and negative
  externalities of Wal-Mart?
• 4.) Is Wal-mart good for America? Explain with
  economic reasoning.