1. a) Fill the missing spaces in the sentence below: The fact that market outcomes fail to achieve Pareto efficiency in the case of ______, implies that ______.

A.externality; government regulation is necessary

B.natural monopoly; private property rights are unethical

C.public goods; government action may improve the allocation of resource

D.public goods; government must maximize income tax revenues

b) See the four statements below. Choose the correct answer and provide explanation for the correct answer.

(i)Economies of scale lower total cost of production

(ii)Economies of scope give rise to natural monopolies

(iii)Diseconomies of scale justify the breakup of conglomerates

(iv)The benefits from vertical integration justify hostile takeovers.

A.All are correct

B.(ii) is correct

C.None is correct

D(iii) and (iv) are correct

c) Explain whether government spending on space exploration is an injection or a withdrawal from the economy. Does your answer change if all increase in space exploration pays for USA produced hardware?