resources. We introduced this idea with the subjects of international trade and demand and supply in other

chapters and reinforced it in all the subsequent discussions of how households and firms make decisions.

Second, markets may sometimes produce unwanted results. A short list of the cases in which markets produce

unwanted results includes monopoly and other cases of imperfect competition, pollution, poverty and

inequality of incomes, discrimination, and failure to provide insurance.

Third, while government may play a useful role in addressing the problems of markets, government action is

also imperfect and may not reflect majority views. Economists readily admit that, in settings like monopoly or
negative externalities, a potential role exists for government intervention. However, in the real world, it is not

enough to point out that government action might be a good idea. Instead, we must have some confidence that
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