s monopoly a good example of competitive free enterprise

A classic economic example is the “ Lemon problem.” In the market for used automobiles, information asymmetry occurs when sellers know more about what they are selling than consumers do. When one party in a transaction has better information than the other party involved, then there’s opportunity for exploitation.

Then I discuss market failure in K–12 education as an example.Įfficient markets require high levels of transparency and free flow of information. Though there are other types of market failure, in this piece I discuss the four most common types of market failure with examples from various industries. The main types of market failure include asymmetric information, concentrated market power, public goods and externalities. Under some conditions, government intervention may be indicated in order to improve social welfare. Market failure is an economic term applied to a situation where consumer demand does not equal the amount of a good or service supplied, and is, therefore, inefficient. In the words of economists, markets achieve equilibrium when the quantity consumers demand of a good or service equals the amount of a good or service supplied.īut markets aren’t always perfect, and certain conditions may prevent market equilibrium. Under certain conditions, markets will generate the best outcomes for consumers and society. Introductory courses in economics usually focus on perfect competition and why markets are more efficient than other institutional arrangements, such as monopolies or oligopolies.

S monopoly a good example of competitive free enterprise