Market Failure

Read this section for a more detailed look at the topic of market failure. Attempt the "Try It” problem before checking your answer.

Learning Objectives

  1. Explain what is meant by market failure and the conditions that may lead to it.
  2. Distinguish between private goods and public goods and relate them to the free rider problem and the role of government.
  3. Explain the concepts of external costs and benefits and the role of government intervention when they are present.
  4. Explain why a common property resource is unlikely to be allocated efficiently in the marketplace.

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