The Congested Expressway Problem
A city builds a new, toll-free expressway to reduce commute times. Initially successful, the expressway becomes severely congested during rush hour within a year, negating much of the time savings. Explain how the absence of a market for using the expressway contributes to this inefficient outcome.
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Economy
Introduction to Microeconomics Course
CORE Econ
Ch.10 Market successes and failures: The societal effects of private decisions - The Economy 2.0 Microeconomics @ CORE Econ
The Economy 2.0 Microeconomics @ CORE Econ
Analysis in Bloom's Taxonomy
Cognitive Psychology
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The Congested Expressway Problem
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Match each scenario describing an inefficient outcome with the specific valuable item for which a formal market is absent, causing the problem.
A research institute develops a groundbreaking mathematical proof that could significantly improve the efficiency of logistics algorithms, potentially saving companies billions of dollars. Once the proof is published, it becomes public knowledge and can be used by anyone without payment. The institute receives no direct revenue from the companies that benefit, and as a result, it struggles to fund further fundamental research. How does this situation illustrate a market failure?
The Skyscraper and the Scenic View
A large, open-ocean fishery, not subject to any national jurisdiction, is experiencing a rapid decline in fish populations due to overfishing by numerous independent fishing fleets. Each fleet acts in its own self-interest, trying to catch as many fish as possible. From an economic perspective, what is the fundamental reason this situation represents a market failure?