Economics Chapter 5 - Economics Chapter 5 Study for Test...

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Economics Chapter 5 Study for Test MARKET FAILURE What does it mean? It is the market’s inability to produce the right amount of produces. We underallocate or overallocate resources. How do we determine what is right? Allocated efficiency – producing what people want. The mixture of goods and services that people really want. If Ford is producing cars that no one buys, that is not allocated efficiency. Productive efficiency – producing at the lowest cost possible. Efficient means we are getting the most output for our inputs. Just because we are being efficient does not mean we are producing what people want. How do we produce the right amount? We use BOTH kinds of efficiency. People are not getting the healthcare they need, so it is not being efficiently produced. Prime example of a market failure. What do you do when you have a market failure? What is the solution? People do not want the gov’t to intervene. Any monopoly is a market failure. Oligopoly, etc. When you have these, should the giv’t
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This note was uploaded on 04/08/2008 for the course HIST 101 taught by Professor Tranel during the Summer '97 term at St. Louis College of Pharmacy.

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Economics Chapter 5 - Economics Chapter 5 Study for Test...

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