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Explain the three ways economist define efficiency. What is the economic definition of market failure? What...

Explain the three ways economist define efficiency. What is the economic definition of market failure? What are the four situations where markets fail? What market structure is least likely to represent a failed market?

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Answer #1

Soln. Three ways by which economist define the efficiency are -

1. Measuring the price level

2. Measuring the employment rate

3. Measuring the interest rate

Market Failure - The economic definition of market failure is the inefficient distribution of the goods and services in the free market. It means, available resources are not properly utilized to produce the optimum level of production.

  Four situations where market fails -

  1. Lack of public goods

2. Positive and negative externalities

3. Market control

4. Underprovision of merit goods and overprovision of demerit goods

Perfect competition market structure is least likely to represent a failed market.

  

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