ANSWER TO TRY IT! PROBLEM Figure 6.14 On the assumption that the coffee market is competitive and that it is characterized by well-defined exclusive and transferable property rights, the coffee market meets the efficiency condition That means that the allocation of resources shown at the equilibrium will be the one that maximizes the net benefit of all activities The net benefit is shared by coffee consumers (as measured by consumer surplus) and coffee producers (as measured by producer surplus) 6.3 Market Failure LEARNING OBJECTIVES Explain what is meant by market failure and the conditions that may lead to it Distinguish between private goods and public goods and relate them to the free rider problem and the role of government Explain the concepts of external costs and benefits and the role of government intervention when they are present Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 327