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Topic: Market failures 

Economics

 Standard 4.  Understands basic features of market structures and exchanges
  Level III (Grade 6-8)
   Benchmark 3.Understands that the United States government uses laws and regulations to maintain competition, but sometimes the government reduces competition unintentionally or in response to special interest groups
    Knowledge/skill statements
     1.Understands that the United States government uses laws and regulations to maintain competition
     2.Understands that sometimes the U.S. government reduces competition unintentionally
     3.Understands that the U.S. government sometimes reduces competition in response to special interest groups
  Level IV (Grade 9-12)
   Benchmark 2.Knows that collusion among buyers or sellers reduces the level of competition in a market and is more difficult in markets with large numbers of buyers and sellers
    Knowledge/skill statements
     1.Knows that collusion among buyers or sellers reduces the level of competition in a market
     2.Knows that collusion among buyers or sellers is more difficult in markets with large numbers of buyers and sellers
   Benchmark 5.Understands that externalities are unintended positive or negative side effects that result when the production or consumption of a good or service affects the welfare of people who are not the parties directly involved in the market exchange (e.g., a negative externality in consumption occurs when cigarette smoking by one individual has harmful or undesirable effects on nonsmokers, a positive externality in production occurs when a neighbor’s home improvements increase the value of nearby properties)
    Knowledge/skill statements
     1.Understands that externalities are unintended positive or negative side effects
     2.Understands that externalities result when the production or consumption of a good or service affects the welfare of people who are not the parties directly involved in the market exchange
     3.Knows that an example of a negative externality in consumption is when cigarette smoking by one individual has harmful or undesirable effects on nonsmokers
     4.Knows that an example of a positive externality in production is when a neighbor’s home improvements increase the value of nearby properties
   Benchmark 6.Understands that a natural monopoly exists when it is cheaper for one supplier to produce all of the output in a market than for two or more producers to share the output (e.g., electric companies)
    Knowledge/skill statements
     1.Understands what a natural monopoly is
     2.Knows the conditions required for a natural monopoly to form
     3.Knows that electric companies are an example of a natural monopoly
   Benchmark 7.Understands that public service commissions typically regulate natural monopolies because people cannot rely on competition to control price and service levels in these cases
    Knowledge/skill statements
     1.Knows that public service commissions typically regulate natural monopolies
     2.Understands that competition cannot control prices and service levels when natural monopolies are present