Thursday, April 15, 2010

Market Failures


Students shall be able to

  1. Describe graphically the collective demand curve for a particular public good and explain this curve.

  2. Define the optimal quantity of a public good.

  3. Identify the purpose of benefit-cost analysis and explain the major difficulty in applying this analysis.

  4. Explain what is meant by spillovers or externalities.

  5. Describe graphically or verbally how an overallocation of resources results when spillover costs are present and how this can be corrected by government action.

  6. Describe graphically or verbally how an underallocation of resources occurs when spillover benefits are present and how this can be corrected by government action.

  7. Explain the Coase theorem, its significance, and the three conditions necessary for it to work.

  8. Describe three policies that would reduce negative externalities.

  9. Use an example to explain a market for pollution rights.

  10. Relate the law of conservation of matter and energy to the pollution problem.

  11. Describe and give an example of "the tragedy of the commons."

  12. Give an overview of the Superfund law of 1980 and the Clean Air Act of 1990.

  13. Using supply and demand diagrams, explain the economics of recycling.

  14. Give two examples of how inadequate information about sellers can create a market failure.

  15. Explain the moral hazard and adverse selection problems faced by sellers.

  16. Define and identify terms and concepts listed at the end of the chapter.



  1. Students shall watch "Economics USA: Pollution."



  1. Watch "Economics USA: Pollution."




Monitor and adjust as necessary.