Market Failure and the Role of Government

Marginal Private Benefit (MPB) equals Marginal Private Cost (MPC).

Marginal Social Benefit (MSB) equals Marginal Social Cost (MSC).

The government intervenes to set a price floor.

Firms maximize their profits without considering social costs.

A neighbor plants a beautiful garden, increasing the property values of surrounding homes.

A company provides job training to its employees, increasing their productivity.

A factory emits pollution into the air, affecting the health of nearby residents.

An individual receives a vaccination, preventing the spread of disease.

A negative externality.

A positive externality.

A private good.

A public good.

Taxes can decrease production of goods with positive externalities.

Taxes can increase production of goods with negative externalities.

Taxes can decrease production of goods with negative externalities.

Taxes are not effective in correcting market failures.

The factory will increase its production to offset the tax.

The factory will decrease its production, leading to a more socially optimal quantity.

The tax will have no effect on the factory's production decisions.

The factory will switch to producing a good with positive externalities.

Perfect inequality.

Perfect equality.

Moderate inequality.

A declining economy.

They lead to underproduction of the good.

They lead to overproduction of the good.

They have no effect on market equilibrium.

They always result in a socially optimal outcome.

Rivalrous and excludable.

Rivalrous and non-excludable.

Non-rivalrous and excludable.

Non-rivalrous and non-excludable.

Private goods.

Goods with negative externalities.

Public goods.

Goods with positive externalities.

The relationship between price and quantity demanded.

The distribution of wealth in a country.

The cost of production for a firm.

The level of unemployment in an economy.