a.The famous economist Joseph Schumpeter once said that economists should not be concerned about collusion between oligopolistic firms because their secret agreements will eventually fall apart. Do you agree? Why?

b. The famous economist Ronald Coase posed the following possible solution to the problem of externalities:

Say there is a factory which pollutes a river that provides drinking water to a local village. The government can allocate private property rights over the use of the river to one of the parties (either to the factory owner or to each of the local villagers), and then the respective parties can simply trade (buy/sell) the right to use the river.

Is this an effective solution to the externality problem? Explain your answer.

c. The famous economist Milton Friedman favoured lower taxation and lower spending by governments. He argued that no government employee spends taxpayers' money as carefully as the taxpayer him/herself would spend it. Does this arguement apply to the government provision of public goods?

d.Some economists argue that unions raise prices and cause unemployment by bargaining for higher wages than would otherwise be the case. Other economists argue that this is not true. Who is right and why?