Market Failures

1. The depletion of a shared resource due to individual self-interest.
4. Marketable licences that allow firms to produce a certain level of pollution.
9. The total benefit to society, including private and external benefits.
10. A beneficial spillover effect enjoyed by third parties.
12. A harmful spillover effect of production or consumption on others.
13. A situation occurring when sellers/buyers have information that the other parties do not, leading to a selection of low-quality goods or high-risk parties.
15. The total cost to society, including private and external costs.
18. A legal minimum price that can lead to surpluses.
19. A payment from the government that lowers the cost of production.
20. A good that is rivalrous but non-excludable, leading to overuse.

2. When the free market allocates resources inefficiently, leading to a loss of social welfare.
3. When one party in a transaction has more information than the other.
5. A good that is under-consumed because individuals underestimate its benefits.
6. Actions taken by the state to correct market failure.
7. A tax on spending that increases the cost of production or consumption.
8. A legal maximum price that can lead to shortages.
11. A cost or benefit affecting a third party that is not reflected in the market price.
14. A good that is non-rivalrous and non-excludable.
16. A good that is over-consumed because individuals underestimate its costs.
17. When individuals take greater risks after a transaction because they are protected from consequences.