Glossary Category: Economic Efficiency, Market Failure - Page 2 - 3auk

positive externality

A positive externality happens when the production or use of a product or service gives benefits to other

Externalities, also known as spillover effects, occur when producing or consuming a good or service impacts a third

Private benefits are the advantages received directly by an individual person or a business from consuming or producing

Private costs are the expenses a business or individual must pay to produce a good or service. These

Market failure occurs when a free market fails to distribute resources efficiently, leading to outcomes that do not

Market failure happens when the free market is unable to distribute resources in the best possible way, resulting

Dynamic efficiency occurs when an economy improves its performance over a long period, rather than just at a

Pareto optimality, also known as Pareto efficiency, is a state where resources are distributed in a way that

Allocative efficiency happens when resources are used to produce the mix of goods and services that society values

Productive efficiency happens when a company or an economy produces goods at the lowest possible cost, using the