Efficiency of a competitive market, Microeconomics

The Efficiency of a Competitive Market

*? When an competitive markets generate an inefficient allocation of the resources or market failure?

  1) Externalities

  • Costs or benefits which do not show up as part of the market price (for example pollution)

 2) Lack of Information

  • Imperfect information prevents the consumers from making utility maximizing decisions.

*? Government intervention in these markets increase efficiency.

*? Government intervention without market failure creates inefficiency or the deadweight loss.

Posted Date: 10/12/2012 6:12:52 AM | Location : United States

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