Question

The five cases of market failure include the following except:


common property resources and provision of public goods


monopoly and imperfect competition


externalities and open-market policy


asymmetric information

Answer 1

The five cases of market failure typically include:

1. **Externalities** - When a transaction affects third parties who are not involved in it, leading to costs or benefits not reflected in market prices (e.g., pollution).
2. **Public Goods** - Goods that are non-excludable and non-rivalrous, leading to underproduction in a free market since individuals cannot be easily charged for their use (e.g., national defense).
3. **Common Property Resources** - Resources that are accessible to all but can be overused (e.g., fisheries, forests).
4. **Asymmetric Information** - A situation where one party has more or better information than the other, affecting transactions (e.g., used car sales).
5. **Market Power (Monopoly and Imperfect Competition)** - When a single firm or a group of firms can control prices and exclude competitors.

From the options provided, "externalities and open-market policy" does not fit as a distinct case of market failure compared to the others listed. Open-market policy relates more to economic policy than market failure itself. Thus, the correct answer is:

**externalities and open-market policy**.