What is market failure? Explain in your own words. (3 marks). 2. Why do markets fail. List two reasons and explain them in your own words. (4 marks) . 3. Explain what an external effect (also known as an externality) is in your own words. Do not copy this from the slides or textbook. (3 marks). List four examples of externalities that are not in the slides. (4 marks) 5. Explain what a social dilemma is and list one example of a current social dilemma. (3 marks). 6. The graph below shows the marginal private cost of a robot producing factory for phone construction. The robots use a toxic chemical that emits emissions. This affects the citizens of Port Elizabeth who have mobile phone factories in their town. The marginal social cost that the town citizens' face is also captured by the diagram. 600 MSC 50 460 400 MPC Costs ($) 300 P = 340 260 200 100 10 20 30 40 50 60 70 80 90 100 110 120 130 14050 70 80 90 100 110 120 130 140 Output, Q a) Why is the marginal social cost zero at an output quantity of zero? (2 marks). b) Why does the marginal private cost curve slope upward? (2 marks). c) Why does the marginal social cost curve slope upward at a different rate than the marginal private cost curve? (2 marks). Because the externality increases with production. d) Write down the MSC curve equation. (2 marks) e) Write down the MPC curve equation. (2 marks). 7. Assume that the town citizen's have the right to free air and the factory does not have the right to pollute. That is the citizens' own the property right to free air. Now, in a bargaining scenario answer the following questions: Given that it is illegal for the factory to use the robots where will production be without a bargaining agreement? (2 marks). At zero because to bargain they need to distribute property rights. b) The minimum acceptable offer that the citizens' will accept for the factory to pollute? (3marks). c) What is the reservation option of the factory? (3 marks). d) What is the reservation option of the citizens