(8th edition) (the pearson series in economics) robert pindyck, daniel rubinfeld microecon 618

Part Four Information, Market Failure, and the Role of Government Part Four shows how markets can sometimes fail and explains how government intervention can be used to achieve economic efficiency Much of the analysis in the first three parts of this book has focused on positive questions—how consumers and firms behave and how that behavior affects different market structures Part IV takes a more normative approach Here we will describe the goal of economic efficiency, show when markets generate efficient outcomes, and explain when they fail and thus require government intervention Chapter 16 discusses general equilibrium analysis, in which the interactions among related markets are taken into account This chapter also analyzes the conditions that are required for an economy to be efficient and shows when and why a perfectly competitive market is efficient Chapter 17 examines an important source of market failure—incomplete information We show that when some economic participants have better information than others, markets may fail to allocate goods efficiently or may not even exist We also show how sellers can avoid problems of asymmetric information by giving potential buyers signals about product quality Finally, Chapter 18 discusses two additional sources of market failure: externalities and public goods We show that although these failures can sometimes be resolved through private bargaining, at other times they require government intervention We also discuss a number of remedies for market failures, such as pollution taxes and tradeable emission permits CHAPTERS 16 General Equilibrium and Economic Efficiency 595 17 Markets with Asymmetric Information 631 18 Externalities and Public Goods 661 593