Economics (McConnell), AP* Edition, 20th EditionChapter 4:
Market Failures: Public Goods and Externalities After studying this chapter, you should be able to: LO 4.1 | Differentiate between demand-side market failures and supply-side market failures. | LO 4.2 | Explain the origin of both consumer surplus and producer surplus, and explain how properly functioning markets maximize their sum, total surplus, while optimally allocating resources. | LO 4.3 | Describe free riding and public goods, and illustrate why private firms cannot normally produce public goods. | LO 4.4 | Explain how positive and negative externalities cause under- and overallocations of resources. | LO 4.5 | Show why we normally won't want to pay what it would cost to eliminate every last bit of a negative externality such as air pollution. | LO 4.6 | (Appendix) Describe how information failures may justify government intervention in some markets. |
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