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Consumers in such markets will be faced by prices that exceed marginal
cost, and the allocation of resources will be inefficient.
An imperfectly competitive private market will produce less of a good than
is efficient. As we saw in the chapter on monopoly, government agencies
seek to prohibit monopoly in most markets and to regulate the prices
charged by those monopolies that are permitted. Government policy
toward monopoly is discussed more fully in a later chapter.

Assessing Government Responses to Market Failure
In each of the models of market failure we have reviewed here—public
goods, external costs and benefits, and imperfect competition—the market
may fail to achieve the efficient result. There is a potential for government
intervention to move inefficient markets closer to the efficient solution.
Figure 15.3 "Correcting Market Failure" reviews the potential gain from
government intervention in cases of market failure. In each case, the
potential gain is the deadweight loss resulting from market failure;
government intervention may prevent or limit this deadweight loss. In
each panel, the deadweight loss resulting from market failure is shown as a
shaded triangle.

Attributed to Libby Rittenberg and Timothy Tregarthen
Saylor URL: />
Saylor.org

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