Construct a table to analyse the possible market failures associated with the decisions below

Construct a table like the one in Figure 12.13 to analyse the possible market failures associated with the decisions below. In each case, can you identify which markets or contracts are missing or incomplete? You use money that you borrow from the bank to invest in a highly risky project. A city airport increases its number of passenger flights by allowing nighttime departures. You contribute to a Wikipedia page. A government invests in research in nuclear fusion.

Decision	How it affects others	Cost or benefit	Market failure (misallocation of resources)	Possible remedies	Terms applied to this type of market failure
A firm uses a pesticide that runs off into waterways	Downstream damage	Private benefit, external cost	Overuse of pesticide and overproduction of the crop for which it is used	Taxes, quotas, bans, bargaining, common ownership of all affected assets	Negative external effect, environmental spillover
You take an international flight	Increase in global carbon emissions	Private benefit, external cost	Overuse of air travel	Taxes, quotas	Public bad, negative external effect
You travel to work by car	Congestion for other road users	Private cost, external cost	Overuse of cars	Tolls, quotas, subsidized public transport	Common-pool resource, negative external effect
A firm invests in R&D	Other firms can exploit the innovation	Private cost, external benefit	Too little R&D	Publicly funded research, subsidies for R&D, patents	Public good, positive external effect
An employee on a fixed wage decides how hard to work	Hard work raises employer’s profits	Private cost, external benefit	Too little effort; wage above reservation wage; unemployment	More effective monitoring, performance-related pay, reduced conflict of interest between employer and employee	Incomplete labour contract, hidden action, moral hazard
Someone who knows he has a serious health problem buys insurance	Loss for insurance company	Private benefit, external cost	Too little insurance offered; insurance premiums too high	Mandatory purchase of health insurance, public provision, mandatory health information sharing	Missing markets, adverse selection
Someone who has purchased car insurance decides how carefully to drive	Prudent driving contributes to insurance company’s profits	Private cost, external benefit	Too little insurance offered; insurance premiums too high	Installing driver monitoring devices	Missing markets, moral hazard
Borrower devotes insufficient prudence or effort to the project in which the loan is invested	Project more likely to fail, resulting in non-repayment of loan	Private benefit, external cost	Excessive risk; too few loans issued to poor borrowers	Redistribute wealth; common responsibility for repayment of loans (Grameen Bank)	Moral hazard, credit market exclusion
Bank that is ‘too big to fail’ makes risky loans	Taxpayers bear costs if bank fails	Private benefit, external cost	Excessively risky lending	Regulation of banking practices	Moral hazard
A monopoly, a firm producing a differentiated good, or a firm with declining AC sets P > MC (Unit 7)	Price is too high for some potential buyers	Private benefit, external cost	Too low a quantity sold	Competition policy, public ownership of natural monopolies	Imperfect competition, decreasing average costs, natural monopoly