Topic 3: Market Inefficiencies

National Cabinet is to meet on Monday 11 July 2022 to discuss the management of emerging COVID- 19 variants and Australia's Mask Mandate Policy in response. You are part of an expert, interdisciplinary committee led by Australia's Chief Medical Officer Professor Paul Kelly and have been asked to discuss the economic benefits and costs of mandating Masks.

Specifically, the National Cabinet would like to know whether the Australian government should subsidise the cost of Masks for all eligible Australians or leave it to the free market where those who value it will pay for it.

In your presentation, you should discuss key microeconomic concepts such as marginal benefits and costs, market failure, third-party problem and externalities. Your demand and supply analysis framework should represent the mask market. Please read Chapter 7 "Market Inefficiencies: Externalities and Public Goods", from page 219-227, to help you with your briefing and finding other credible resources (e.g. peer reviewed journal articles) which explore these issues further. The use of real data (from grey literature) where possible to support your presentation is desirable.