Market failures

• A monopoly is when there is only ONE major producer of a product
• The problems of monopolies are:

  -over reliance

  -they are able to change prices at their will
• Monopoly occurs when they invented their product/good (ex. Google), they bought their competitions (ex. Grab) and when it's very expensive to enter the industry.
• Solutions to monopolies are government setting a ceiling price, and nationalization of the industry.
• Oligopoly is when there are FEW producers of a good or service.
• Problems of an oligopoly is the fact that oligopolies can collude (decide together) on prices.
• Solutions to oligopoly are: nationalization the industry, and anti-trust laws which make collusion illegal.
• Negative externalities is when the actions of an individual or business result in cost for others.
• The problem with negative externalities is when there are spillover effects, most likely, the people out of the business transaction are the ones who have to compensate.
• Pollution is one example of a negative externality.
• Solutions to negative externalities are: making goods/services with negative externalities illegal, and placing a tax on these products. (Ex. Sin tax)
• Sin tax is a tax in which when people decide to purchase a cigarette, they pay a tax which is donated to health services that deal with second hand smoking.
• Positive externalities when the actions of an individual result in FREE BENIFITS for others.
• The problem with positive externalities is when the benefits are free, who pays for these services?
• The solutions for positive externalities are: Government gives businesses an incentive to provide the services and government provides these services through public services (ex. Trains & roads).