Question

directions: read each main idea. use your textbook to supply the details that support or explain each main idea.
a. types of market failure
main idea: several factors contribute to market failure, including lack of competition, lack of information or knowledge, lack of public goods, static resources, and negative externalities and spillovers.

1. detail: lack of __________ lowers a businesss incentives to use __________ more efficiently.
2. detail: all participants in the economy must have adequate __________ in order for the market to function __________.
3. detail: resource __________ is a situation in which necessary inputs do not move to market where they would earn __________ returns.
4. detail: government must produce sufficient and viable __________ goods because private business cannot __________ by providing them.
5. detail: when businesses do not account for negative __________ effects, these unintended consequences may result in huge losses and even market __________.
6. detail: the pollution of underground drinking water is one type of negative __________ that harms an __________ third party, or those that use the

Explanation:

1. Lack of competition lowers a business's incentives to use resources more efficiently.
2. All participants in the economy must have adequate information in order for the market to function properly.
3. Resource immobility is a situation in which necessary inputs do not move to market where they would earn higher returns.
4. Government must produce sufficient and viable public goods because private business cannot profitably by providing them.
5. When businesses do not account for negative spillover effects, these unintended consequences may result in huge losses and even market failure.
6. The pollution of underground drinking water is one type of negative externality that harms an uninvolved third party, or those that use the water.

Answer:

1. competition; resources
2. information; properly
3. immobility; higher
4. public; profitably
5. spillover; failure
6. externality; uninvolved