Market Failures Pop Quiz 1 List three types

Market Failures

Pop Quiz 1. ) List three types of monopolies? 2. ) List the 4 types of market structures discussed in class. 3. ) There are monopolies than oligopolies in our society. True / False 4. ) A market with 2 or three sellers and lots of buyers is called _______ 5. ) A market with lots of sellers and buyers and identical products is considered ____.

6. ) What is the one difference between perfect competition and Monopolistic Competition? 7. ) Which of the following is best associated with Monopolistic competition? a. Price fixing b. Product differentiation c. Identical Products d. Small # of sellers 8. ) What type of market structure do consumers want most to insure the cheapest products? 9. ) If you own a business what type of market structure do you want? 10. ) Which of the four market structures discussed is the most common in our society?

Market Failures • Market Failure: – The market fails to sustain itself. – Usually because one of the following isn’t true: • Not enough competition • Buyers and sellers aren’t informed enough • Resources aren’t free to move from industry to industry • Prices don’t reflect the cost of production

• Inadequate Competition: – Larger but fewer firms results in: • Waste of resources • Higher prices and reduced output • Political power • Inadequate Information: – Information on jobs and prices is hard to find. – How would this hurt the market? • Resource Immobility: – Land, labor, capital don’t easily move from one market to another. – Workers don’t want to move.

Externalities • Unintended side effect that either benefits or harms a third party not involved in the activity that cause it. • Seen as a market failure because their cost is not reflected in the market price.

• Negative Externality: – Harm, cost or inconvenience suffered by a 3 rd party because of actions by others. – Example: Airport built, homes around have to deal with the noise. • Positive Externality: – Benefit received by third party even though they have nothing to do with it. – Example: Because of the new airport restaurants sell more meals.

Pg 183 #2, 3, 4, 5 Provide Examples. • Government solutions to market failures. • What are anti-trust laws? – Laws that protect against monopolies and protect competition. Try to prevent market failures caused by Inadequate Competition. – Prevent Price Fixing and Price Discrimination. • What is Public Disclosure? – Requirement of businesses to reveal info to the public. Prevents market failure caused by Inadequate Information.

Pop Quiz 2 1. A market with one seller. 2. A market with 2 -3 sellers and lots of buyers is an example of _______. 3. What market structure would promote both product variety and low prices? 4. Anti-trust laws are designed to prevent which of the four market types. 5. When a business makes a third party pay the cost of production it is called an _____.

6. Public Disclosure prevents which of the four reasons why markets fail? 7. A seller who sales their product to one retailer for less than others is practicing _____. Ant-trust laws try to prevent this so there is an even playing field. a. Price discrimination b. market fixing c. what? 8. ) Which market structure would be most likely to fail? 9. ) An example of non-price competition would be: a. Giveaways b. Sponsorships c. Advertisements d. all of the above 10. ) List three of the four types of monopolies.

Movie: Wal-mart 1. ) List and explain 5 interesting things from the film. 2. ) What market structure is Wal-Mart an example of? Explain. 3. ) What are some positive and negative externalities of Wal-Mart? 4. ) Is Wal-mart good for America? Explain with economic reasoning.