Question

In: Economics

Provide healthcare examples of the following market failure: a) External benefits- b) External costs- c) Public...

Provide healthcare examples of the following market failure:

a) External benefits-

b) External costs-

c) Public goods.

d) Imperfect competition

e) Imperfect information

Provide healthcare examples of the following market failure:

a) External benefits-

b) External costs-

c) Public goods.

d) Imperfect competition

e) Imperfect information

Provide healthcare examples of the following market failure:

a) External benefits-

b) External costs-

c) Public goods.

d) Imperfect competition

e) Imperfect information ( NO PLAGIARISM PLEASE , 70 WORDS ESSAY FOR a, b, c, d, e with examples please )

Solutions

Expert Solution

Market failure is the economic situation defined by an inefficient distribution of goods and services in the free market. In market failure, the individual incentives for rational behavior do not lead to rational outcomes for the group.

In other words market failure occurs whenever the individuals in a group end up worse off than if they had not acted in perfectly rational self-interest.

More simply we can say a party has to pay the cost or accrue the benefits without any direct relationship with those commodity.

1- External benefits: it accrues to an individual when he doesn't even pay for that good or service.

Example:when a individual x plant a tree in his garden, it would improve the quality of the air ,benefit which would be enjoyed by his neighbours it would be called the external benefit.

Because neighbour doesn't pay anything for the garden.

2- External Cost: when an individual X smokes it would degrade the quality of environment and consequently the neighbours of this person surrounding him will experience the health disease, so it is an example of external cost.

3- Public Goods: when government construct a road out of the income earned through taxes . that tax is paid by the few individuals and remaining doesn't pay tax so the other person who doesn't pay the tax also enjoy the benefit of the road so the one who are enjoying the benefit of road without any payment that is without paying any tex, will create the market failure.

It is called the example of external market failure in case of public good.

4- Imperfect Competition: in case of the monopolistic competition there is excess capacity which implies that the monopolist does not produce at the point where the average cost is minimum ,rather it produce much before than that quantity.so there is excess capacity , which create market failure.

5. Imperfect Information: in case of imperfect information we take example of insurance market.

in insurance market when a person get insurance act in movies it doesn't value his life as he used to do .

Because when he get insured he assure that if he would die, he will get the amount of insurance .So he act in riskier way.

Due to his behaviour the insurance company have to bear high cost.


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