Presentation on theme: "Market Failures What causes a market to fail in free enterprise?"— Presentation transcript:
Market Failures What causes a market to fail in free enterprise?
Inadequate Competition Without regulation large industries can pay bosses millions of dollars instead of cutting cost. A monopoly can cause artificial shortages and higher prices It can also allow lobbyists to control politicians It can demand tax breaks or threaten to move
Inadequate Information Does the same job get the same salary in different markets? Does a school secretary get paid the same as a secretary at an insurance company? Do the same goods bring in the same amount for different producers? What about the consumer? Bailout Bill and Wall Street
Resource Immobility Land, capitol, labor, and entrepreneurs do not move to markets where returns are the highest What happens when a military base closes? What about Wild West World?
Externalities Can benefit or harm a third party Negative externality is a harm, cost or inconvenience caused by others Baby crying on a plane Smell from sugar beets Positive externality is a benefit received Price of you home goes up in college hill Restaurants business increases downtown
Public Goods Used by everyone and their value does not decrease because of one person added Market does not supply these goods Infrastructure is a great example What about Gas? Have you seen what is happening in the Southeast? A man pulled a gun in line. While the market is good at satisfying individual needs, it struggles to provide for the collective whole
Which of these should be remain a public good and which should be a private good controlled by competition Flood Control National Defense Country Roads Fire Protection Police Protection