Today we will learn about a market failure called asymmetric information, a situation in which one party has more information about a transaction than another. You should read the text chapter identified below in the homework section, watch the related videos for help in understanding this material, do the activities identified, in the homework section and be prepared for the Problem of the Day. This page contains all the information you need for today's class. Use the table of contents on the right to help you navigate.
Read Mankiw (Chapter 22 - "Asymmetric Information" section).
Problem of the Day: You will work cooperatively with your partner to construct a response to the following prompt.
Both public goods and common resources involve externalities
Are the externalities associated with public goods generally positive or negative? Use examples in your answer. Is the quantity of public goods supplied by the free market greater than or less than the socially efficient quantity?
Are the externalities associated with common resrources generally positive or negative? Use examples in your answer. Is the use of common resources in a free market socially efficient?
Lecture
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