What are market failures? Discuss examples of market failures. What can government do to improve the results of market failures?
What will be an ideal response?
Market failures are undesirable social results associated with free market outcomes. They include the growth of monopoly power, the presence of externalities, a lack of public goods and services, and an inequitable distribution of income. Government can intervene by enforcing anti-trust, tax or subsidize externalities, provide for public goods and redistribute income to correct for market failures.??
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In the above figure, the market is at its equilibrium. Area A + area B is equal to
A) consumer surplus. B) total revenue. C) total surplus. D) marginal benefit. E) producer surplus.
The Fed's low short-term interest rate policy from 2002-2004, along with housing regulations promoting low down-payment loans to sub-prime borrowers, encouraged
a. conventional 30-year, fixed rate mortgages which have relatively high default and foreclosure rates. b. conventional 30-year, fixed rate mortgages which have relatively low default and foreclosure rates. c. adjustable rate mortgages which have relatively low default and foreclosure rates. d. adjustable rate mortgages which have relatively high default and foreclosure rates.
The responsiveness of demand to changes in income holding the good's relative price constant is
A) price elasticity of demand. B) income elasticity of demand. C) elasticity of supply. D) cross price elasticity of demand.
Alex's production is worth $60 and Harry's is worth $40 . They decide to form a coalition and produce together such that their combined production is worth $135 . What is the maximum benefit Alex can earn while ensuring Harry does not leave the coalition?
a. $75 b. $96 c. $77.5 d. $94