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1. Digital Study Guide, written by William Walstad
2. Paul Solman Videos (Chapter Content)

After reading this chapter, you should be able to:

1. Differentiate between demand-side market failures and supply-side market failures.
2. Explain the origin of both consumer surplus and producer surplus, and explain how properly functioning markets maximize their sum, total surplus, while optimally allocating resources.
3. Describe free riding and public goods, and illustrate why private firms cannot normally produce public goods.
4. Explain how positive and negative externalities cause under- and overallocations of resources.
5. Show why we normally won't want to pay what it would cost to eliminate every last bit of a negative externality such as air pollution.