Market failure and policy
| English | 中文 | Pinyin |
|---|---|---|
| public good/ˈpʌblɪk ɡʊd/ | 公共物品 | gōng gòng wù pǐn |
| government failure/ˈɡʌvənmənt ˈfeɪlɪə/ | 政府失灵 | zhèng fǔ shī líng |
A decision you can investigate
- Drivers choose routes using their own journey cost while adding delays for other users.
- A private optimum can differ from the social optimum.
Build the explanation
- For a negative production externality, marginal social cost exceeds marginal private cost. The market quantity can exceed the socially efficient quantity.
- A public good 公共物品 is non-rival and non-excludable; free riding can cause under-provision.
Match the terms to their precise meanings.
Use these definitions in the particular context of Market failure and policy.
Work through the evidence
- A congestion charge can raise the private cost of peak journeys. If drivers respond, journeys and delays fall.
- Compare the charge with public transport investment: one discourages journeys, the other improves alternatives.
Which condition identifies the efficient output in the simple externality model?
A congestion charge can raise the private cost of peak journeys. If drivers respond, journeys and delays fall. Compare the charge with public transport investment: one discourages journeys, the other improves alternatives.
Test the limits
- A transfer of tax revenue is not itself a social resource cost.
- Policy evaluation should consider the size of the externality, enforcement costs, equity and unintended effects.
Which caution belongs to this particular task?
A transfer of tax revenue is not itself a social resource cost. Policy evaluation should consider the size of the externality, enforcement costs, equity and unintended effects.
The explanation in this lesson makes a conditional claim; relevant context and evidence still matter.
Policy evaluation should consider the size of the externality, enforcement costs, equity and unintended effects.
Apply and explain your answer
- Which condition identifies the efficient output in the simple externality model?
- Marginal social benefit equals marginal social cost.
Choose the two statements supported by this lesson.
The concept and worked evidence support these claims; the stated limits rule out the universal shortcut.
Use the terms precisely
- public good: A good that is non-rival and non-excludable.
- government failure 政府失灵: Intervention that worsens allocation or creates avoidable inefficiency.
A congestion charge can raise the private cost of peak journeys. If drivers respond, journeys and delays fall. Compare the charge with public transport investment: one discourages journeys, the other improves alternatives.
A transfer of tax revenue is not itself a social resource cost. Policy evaluation should consider the size of the externality, enforcement costs, equity and unintended effects.
For a negative production externality, marginal social cost exceeds marginal private cost. The market quantity can exceed the socially efficient quantity.