Market Failure and Government Intervention

• Market Failure


  When the price mechanism leads to a misallocation of resources
• Tradable pollution permits


  Permits which allow firms to pollute up to a certain limit. These permits can then be traded between firms
• Negative Production Externality Diagram


  MSC is above MPC because we have to add on the external costs

  
• Public Goods


  Goods that are non- rivalry and non-excludable
• Information Gaps


  When consumers or producers lack the information needed to make an informed decision