Learning objectives
Define productive efficiency and allocative efficiency and state the condition for each: output at minimum average cost, and price equal to marginal cost
Explain Pareto optimality and dynamic efficiency and how the different kinds of efficiency can conflict
Define market failure and explain its causes, including public goods, merit and demerit goods, externalities, information failure, market power and immobile factors
Explain asymmetric information and moral hazard with examples from insurance, second-hand goods and banking, and analyse why they cause market failure
Continue with a revision plan
These learning objectives are available to everyone. Sign in with an eligible plan to read the full note and worked examples.