ECON-E 201 Lecture Notes - Lecture 16: Cost, Market Failure, Marginal Cost
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ECON-E 201 Full Course Notes
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Econ-e201 lecture 16 notes- markets: other market failures. Market failure: perfectly competitive price system allocates resources efficiently through interaction of markets, market failure- unrestrained market economy leads to too few/too many resources being allocated to specific economic activity. Often addressed by public policy (government: types of market failures. Externalities: externalities- consequence of economic activity spillover to affect third parties. Positive externality- creates benefit: third parties- not directly involved in given activity/transaction, negative externalities: pollution. Pollution- is old problem faced by rich and poor countries; economic problem coped with by balancing benefits/costs. Private cost of production- borne by producer; supply curve. Marginal private cost (mc)- private cost of producing one more unit of good/service. External cost of production- borne by other people than producers. Marginal external cost (me)- cost of producing one more unit of good/service that falls on people other than producers.
