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Chapter 5 copy - Chapter 5 Section 1 1 Vocabulary Market...

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Chapter 5 Section: 1 1. Vocabulary Market failure- price systems fail to account for some costs and therefore cannot distribute them appropriately. Externalities- an effect that an economic activity has on people and business that are neither producers nor consumers of the good or service being produced. Public good- any good or service that is consumed by all members of a group. 2 . Q : How do prices coordinate the decisions of producers and consumers? 3. Q: How is each of the five main benefits of the price system evident in a grocery store? 4. Q: Give one example not mentioned in the text of each of the following: negative externality, positive externality, and public good. 5. Q : Suppose you go to the grocery store and none of the products have prices list, how would you decide—and how much—to buy? Explain. 6. Q : Suppose that floods damage crops in the Mississippi river valley. How does the price system respond to the damaged harvest? Does this response reflect a benefit of liability of the price system? Explain.
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