(Please answer the following questions.)

Question 1: Market Failures

1. Is there a market failure associated with common-pool resources? If so, what economic tools can be used to correct for this market failure?

2. Is there a market failure associated with public goods? If so, what economic tools can be used to correct for this market failure?

Question 2: Price Floors

Use the tools of economic analysis to evaluate the following statement:

"Higher wages help everybody. Workers are helped because they can now purchase more of the things they need. Business is helped because the increase in workers' purchasing power will increase the demand for products. Taxpayers are helped because workers will now pay more taxes. Union activities and legislation mandating a higher minimum wage will promote economic progress."

Question 3: Monopoly

Monopolies may be able to maintain a profit in the long run by setting their marginal cost of production equal to marginal revenue, and restricting output below the equilibrium level of output. Are there conditions under which this is efficient? If so, explain why. If not, explain why not.