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5 . Market efficiency and market failure The following graph shows equilibrium in a free market, with equilibrium quantity of QB. ----------+ D m QUANTITY

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5 . Market efficiency and market failure The following graph shows equilibrium in a free market, with equilibrium quantity of QB. ----------+ D m QUANTITY For any level of output below QR, a buyer values a unit of goods in this market V the unit will cost a seller. Suppose now that a rm that produces for this market hires a private security force, reducing crime not only in their factory, but also in the small town in which it is located. This is an example of 7 due to Y

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