Economics1220

Week13Assignment"MarketFailure"Chapter16

Trytoanswerasifyouwereexplainingtoafriendwhohadnottakeneconomics.

1. Whatisamarket?

2. WhatdoesaneconomistmeanbyMarket"success"?

3. WhatdoesaneconomistmeanbyMarket"failure"?

4. WhatdoesMargaretEvanstellyouoverandoverabout"allocativeefficiency"?

5. Whatisanexternality?

a. Howdoesanexternalitycauseamarketfailure?

b. Whatgraphisreferredtowhendiscussingthemarketfailurecausedbyanegativeexternality?

c. Drawthegraphandexplainwhytheexistenceofanegativeexternalityinamarketcausesthemarketfailureof"overproduction"ofthegoodthatisassociatedwithanegativeexternality

d. Showhowtheimpositionofataxonthisgoodcouldreducetheoverproduction.

6. Explainwhatismeantby"non-rivalrous"and"non-excludable".

7. Whatisa"PurePublicGood"?

a. Whatisthemarketfailureassociatedwiththeexistenceofa"purepublicgood"?

b. Howcanagovernmentinterventioncorrectthismarketfailure?

8. Explainwhatismeantby"informationasymmetry".

a. Whatisthemarketfailureassociatedwith"informationasymmetry"?

b. Howcanthegovernmentcorrectthemarketfailureassociatedwith"informationasymmetry"?

9. Whatismeantbythe"carrotorstick"approachtogovernmentregulationofmarketfailures?