An economic systemrequires a grouping of private markets linked to one another.is a particular set of institutional arrangements and a coordinating mechanism used to respond to the economizing problem.requires some sort of centralized authority (such as government) to coordinate economic activity.is a plan or scheme that allows a firm to make money at some other firm's expense.What two conditions must hold for a competitive market to produce efficient outcomes?Demand curves must reflect all costs of production, and supply curves must reflect consumers' full willingness to pay.Supply curves must reflect all costs of production, and demand curves must reflect consumers' full willingness to pay.Firms must minimize production costs, and consumers must minimize total expenditures.Firms must maximize profits, and consumers must all pay prices equal to their maximum willingness to pay.Unlike a private good, a public goodhas no opportunity costs.has benefits available to all, including nonpayers.produces no positive or negative externalities.is characterized by rivalry and excludability.Market failure is said to occur wheneversocial surplus is maximized.competitive markets fail to achieve economic efficiency.society is getting as much benefit as possible from its limited supply of resources.the markets are competitive.If one person's consumption of a good does not preclude another's consumption, the good is said to benonrival (in consumption).rival (in consumption).nonexcludable.excludable.