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Markets - why they fail.
Member rating: No Rating | Words: | Submitted: Thu Oct 23 2003
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Unit 2: Markets - why they fail * Allocative efficiency occurs when resources are distributed in such a way that no consumers could be made better off without other consumers becoming worse off. * Dynamic efficiency occurs when resources are allocated efficiently over time. * Productive efficiency is achieved when production is achieved at lowest cost. * Technical efficiency is achieved when a given quantity of output is produced with a minimum number of inputs. Consumer and Producer Surplus Types of Market Failure 1. Monopoly Power * A monopoly exists of there is only one firm or supplier in the economy * A firm holds a monopoly share if it holds a market share that exceeds 25%. Why monopoly power market failure exists Firms gain monopoly powers in the long run because of barriers to entry to the industry, preventing other firms entering the industry; 1. Legal Barriers - government can make competition illegal e.g. only pharmacies can sell prescription drugs by...
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