Chapter Five: Market Failures: Public Goods and Externalities
5.4 Market Failures in Competitive Markets (03:20)
This clip points out that market failures can still occur under perfect competition. Market failures in competitive markets occur when the demand curve does not fully reflect consumers’ willingness to pay or the supply curve does not fully reflect the costs of production.
5.5 Productive & Allocative Efficiency (07:29)
This clip introduces the concepts of productive and allocative efficiency. It points out that a competitive market will achieve both productive and allocative efficiency if there is no demand-side and supply-side market failures (as discussed in clip 5.4). The concept of deadweight loss is also discussed.
5.6 Public Goods & Market Failures (04:13)
This clip distinguishes between public goods and private goods. Market failures associated with free-rider problems under public goods is discussed.
5.7 Commons Goods & Tragedy of the Commons (03:09)
This clip classifies goods into private goods, public goods, commons goods, and club goods, followed by an introduction on the Tragedy of the Commons.
5.8 Solutions to Public Goods Problem (03:16)
The clip presents possible solutions to public good problems, including private provision of public goods and government provision of public goods.
5.9 Market Demand for Public Goods (04:38)
This clip reviews how to obtain the market demand curve for a private good by “horizontally” summing up individual demand curves for the good. It then illustrates that the market demand curve for a public good can be obtained by “vertically” summing up individual demand curves for the good.
5.12 Negative Externalities & Consequences (04:07)
The clip explores issues related to negative externalities and investigates the efficiency loss or deadweight loss associated with this form of market failure.
5.13 Positive Externalities & Consequences (04:24)
The clip explores issues related to positive externalities and investigates the efficiency loss or deadweight loss associated with this form of market failure.
5.14 Private Solutions to Externalities (05:55)
The clip explores possible private solutions to externalities, including individuals negotiating for property rights and engaging in litigations. The presentation also introduces the Coase theorem.
5.15 Government Solutions to Externalities (07:26)
This clip explores possible government solutions to externalities, including direct controls (e.g., emission permits and Cap & Trade), taxes, subsidies and government provision of “quasi-public goods.”
5.16 Optimal Amount of Pollution Reduction (03:37)
Based on cost/benefit analysis, the clip discusses the optimal level of pollution abatement (and, by implication, the optimal level of pollution). Since pollution abatement is not free, the optimal level of pollution is not zero.