10 Questions
What type of cookies does the CORE Econ website use to improve website functionality and user experience?
Essential cookies
When do markets fail according to the text?
When prices do not capture significant effects
What does the text state about the transfer of personal and usage data by CORE Econ?
It does not sell or transfer personal or usage data to third parties
What is the logic behind Adam Smith’s famous claim mentioned in the text?
The pursuit of self-interest leads to efficient outcomes
What happens if analytics cookies are accepted according to the text?
They will help improve website functionality and user experience
What is one cause of market failure mentioned in the text?
A firm producing a differentiated good with price greater than marginal cost
What type of market allocation is Pareto efficient according to the text?
Competitive market allocation
When is the market allocation of a good unlikely to be Pareto efficient?
When the decisions of producers and consumers affect others in ways not adequately taken into account
What do we need to consider when analyzing gains from trade in cases of market failure?
Costs or benefits experienced by parties who are neither buyers nor sellers
What is an example of market failure mentioned in the text?
A firm producing a differentiated good with price greater than marginal cost
Study Notes
CORE Econ Website Cookies and Market Efficiency
- CORE Econ website uses essential cookies for functionality, which can be disabled but may affect access to resources
- Analytics cookies will be set only if accepted, to improve website functionality and user experience
- No personal or usage data is sold or transferred to third parties
- Deepwater Horizon drilling rig on fire mentioned in passing
- Unit 12 discusses markets, efficiency, and public policy
- Market-determined prices lead to efficient outcomes when they account for full effects on others
- When prices fail to capture significant effects, markets fail and require other remedies
- Adam Smith’s claim about the pursuit of self-interest by businessmen is mentioned
- Pareto-inefficient market allocation is described as market failure
- Causes of market failure, including firms choosing price and output levels leading to Pareto inefficiency, are discussed
- Competitive market allocation maximizes total surplus of producers and consumers, and is Pareto efficient if no one else is affected
- Market allocation is unlikely to be Pareto efficient if decisions affect others not adequately taken into account, leading to another cause of market failure
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