MGEA02H3 Chapter : Week 11 study guide
1 Dec 2010
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MGEA02H3 Full Course Notes
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Chapter 16 market failures and government intervention notes. N the operative choice is not between an unhampered free-market economy and a fully centralized command economy; it is rather the choice of which mix of markets and government intervention best suits people"s hopes and needs. N: free markets provide automatic coordination of the actions of decentralized decisions makers, the pursuit of profits in free markets provides a stimulus to innovation and rising material living standards, free markets permit a decentralization of economic power. N market failure (mf) failure of the unregulated market system to achieve allocative efficiency. N mf describes situation in which free market, in absence of government intervention, fails to achieve allocative efficiency. N with a positive externality, a competitive free market will produce too little of the good; with a negative externality, a competitive free market will produce too much of the good. Non rivalrous and non excludable goods.
