What is Complete Market Failure?

• What is Complete Market Failure?:

  • Complete market failure occurs when there is no market whatsoever
  • Goods and services will not be supplied to the market as firms will not receive revenue for supplying the product e.g street lighting
• What has complete market failure lead to?

  underprovision of public goods
• Why is there an underprovision of public goods in complete market failure?

  they are Non rivalrous and non excludable
• Due to public goods being non rivalrous and non excludable what does this lead to?

  Private firms have no incentive in providing public goods
• Why do private firms have no incentive in providing public goods?

  there is an inability to charge prices and make profits
• What is an example of complete market failure?

  streetlights
• What diagram do you draw for complete market failure?

  Positive externality of production