Introduction to Regulation and Market Failure
Economists traditionally favor free and unregulated markets. Economists consider unfettered, competitive markets as most likely to produce efficient outcomes. An efficient market exists when it is not possible to make one person better off without at the same time making at least one other person worse off. However, the efficient market exists only in a world built upon several, very brave, assumptions. In this idealized efficient market, an infinite number of firms compete on the basis of the price of their goods or services, and they are able to maximize their production with the minimum amount of input. Their profits are just sufficient to cover their costs of capital. In the hypothetical ...
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