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inability in Infographics Future Name/I.D. Number:_ Chapter 17 or 30 Market Failure: Pre Class & In - Class Activities Packet Section: Part 2. Matching: Match the Key terms in Column "A" with the definitions in Column "B" by writing the block letter of your choice from Column "B" in the space provided under _Date: Column "A" "A" & match the definitions in column "B" with the meanings or examples or facts in column "C" by writing the lower case letter of your choice under column "B". Column "B" 1. Market Failure A. A good whose consumption by one person doesn't reduce its consumption by another person, a. Column "C" 2. Externality that is, it is nonrivalrous in consumption but the same good can be excludable or nonexcludable Failure to install a smoke alarm because of a fire 3. Negative B. Information that either the buyer or the seller in a market exchange has & the other does not insurance policy. have. Externality Unequal access to information to both parties involved 4. Positive C. Anyone who receives the benefits of a good without paying for it. The theorem developed by Ronald Coase who won the D. A side effect of an action that affects the well-being of third parties. Nobel Prize in Economics in 1991 that states bargaining Externality between the parties involved generate an efficient E. A phenomenon in which the parties on one side of the market, who have information not outcome as long as transaction costs of reaching a deal 5. Marginal Social known to others , self-select in a way that adversely affects the parties on the other side of are minimal or zero regardless of who owns the right. Costs (MSC) the market . The total cost of production of goods for the firm & the 6. Marginal Social F. The condition when an individual's or group's actions impose a cost (adverse side effect) on associated damage caused by pollution to the society at large. Benefits (MSB) others. The additional benefit the society enjoys because of an 7. Socially Optimal G. A condition that exists when one party to a transaction changes his or her behavior in a way activity, such as manicured lawns and gardens Amount (Output) that is hidden from and costly to the other party. Inability of the market to bring desirable results to 8. Internalizing H. The sum of marginal private costs (MPC) and marginal external costs (MEC). society, monopoly firm activities are good examples. 1. A characteristic of a good whereby it is impossible, or prohibitively costly, to The consumption by one doesn't reduce the amount Externalities exclude someone from receiving its benefits after it has been produced. available for others, an example: Street lights 9. Coase Theorem J. A situation in which the market does not provide the ideal or optimal amount of a good. The ability to exclude people from use for not paying. K. The condition when an individual's or group's actions cause a benefit (beneficial side effect) Free loading May happen in the market for bad used cars ("Lemons") 10. Rivalrous in for others . The inclusion of pollution control techniques and Consumption L. An amount that takes into account & adjusts for all benefits (external & private) & all costs measures as part of the cost of doing business 11. Public Good (external & private); the amount at which MSB = MSC. Sometimes referred to as "efficient A good characterized by consumption indivisibilityes and 12. Nonrivalrous in amount". in exhaustiveness, e.g. Defense M. An externality is internalized if the persons or group that generated the externality incorporate m. The total benefits to direct users of services like Consumption into their own private or internal cost-benefit calculations the external benefits (in case of nationwide vaccination program & the society at large. 13. Excludable A consequence of an activity that may be + or - on third positive externality) or the external costs (in the case of a negative externality). N. In the case of trivial or zero transaction costs, the property rights assignment does not matter parties 14. Non-excludable Socially desirable and acceptable outcomes 15. Free Rider to the resource allocation outcome. The additional cost society faces because of a certain 16. Asymmetric O. A good whose consumption by one person reduces its consumption by others, it one of the activity, such as illness, discomfort, pain & sufferings features of a public good. The consumption by one reduces the availability for Information P. A characteristic of a good whereby it is possible, or not prohibitively costly, to exclude others in the case of private goods 17. Adverse someone from receiving its benefits after it has been produced. r. The inability to exclude people from the use of a good or Selection Q. A good whose consumption does not reduce its consumption by others. a service for not paying in the case of public goods. 18. Moral Hazard R. The sum of marginal private benefits (MPB) and marginal external benefits (MEB)