Amarket failureis a scenario in which thefree marketdoes not provide necessary goods and services—such as clean air, police protection, and highways.Anexternalityis a benefit or cost of a business transaction that affects a third party.Private costis the cost of producing a good or service, without considering any of the external costs.A good isexcludablewhen a consumer may not use the good unless the consumer pays for it. A laptop is an excludable good because a consumer must pay for it to use it. A good isnon-excludablewhen all people can use it, even if they do not pay for it. A lighthouse is nonexcludable—anyone can see the signal from the lighthouse.Arivalgood prevents another consumer from using that good at the same time. For example, if one person is using a hammer, another person cannot use the same hammer. (Some rival goods are consumable. When the consumer uses the good, it is destroyed. Eating an apple is an example.)Non-rivalmeans that one person's use of a good does not reduce anyone else's use of it. When you turn on the television to watch a show, you do not reduce anyone else's ability to see that same program.ExcludableNonexcludableRivalPrivate good (laptop)Common/Common-pool goods (fish in a pond)NonrivalClub good (movie theatre)Public good (broadcast)Asymmetric informationoccurs when someone in the market knows more than others in the market.Regulations are sometimes calledadministrative law, as opposed tostatutory law, which refersto legislation passed by Congress. Federal regulations are compiled in theCode of Federal Regulations (CFR).Tech-based standard:all companies must use this method to attain this goalPerformance-based standard:all companies must meet these quotasA horizontal merger is when two companies that make competing products—for instance, two car companies—merge to enjoy greater economies of scale or gain more marketpower.