Explain the two causes of market failures. Given their definitions, could a market be affected by both types of market failures simultaneously?
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Explain the two causes of market failures. Given their definitions, could a market be affected by both types of market failures simultaneously?
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- Question 11: Through markets, buyers and sellers converge to: select all that apply; select all that apply A Exchange information B Perform transactions C Set equilibriums D Determine geographic boundariesAn alternative way of thinking about the forces that cause markets to equlibrate in the real world is to think of markets reallocating the good from low to high valued use. Or to think of how the action of buyers and sellers engaging in mutually beneficial voluntary exchange (market forces) reallocates legal ownership or the physical location of the good from low to high valued used. Consider the demand at a price of $9. Look at the image below. multiple answers may be correct.Let's consider the market for spaces in medical schools (for doctors, say). Suppose the demand for space is given by QD=120-0.5P where P is the price of attending medical school (in thousands of dollars). Also suppose the supply is given by Qs=0.5P. The equilibrium price in this market is The equilibrium quantity of spaces provided is Going to medical school provides a private benefit to the person attending (the future doctor). But, it also benefits the public in that there are more doctors available to provide healthcare. Therefore, this a market with ✓externalities. Suppose that the additional benefit to society from each space in medical school is 60,000 dollars. In this case, the efficient quantity of spaces (that which would most benefit society) is The goverment could achieve the socially efficient outcome by an amount of ✓dollars per space. ✓the schools that provide spaces
- On the basis of the three Individual demand schedules below, and assuming these three people are the only ones in the society, determine (a) the market demand schedule on the assumption that the good is a private good and (b) the collective demand schedule on the assumption that the good is a public good Instructions: Enter your answers as whole numbers (in the gray-shaded cells). Individual #1 Individual #2 Individual #3 (a) Private Demand (b) Public Demand Od Qd Price Qd Price Qd Price Price Qd Price $8 $8 $8 $8 1 1 7 2 7 2 7 2 7 2 6 3 6 3 6 3 6 3 4 4 4 4 5 5 5 4 5 5 4 5 4 5 4 3 6 6 6 3 6 2 7 2 7 2 7 2 7 1 8 1 8 1 8 1 8Question Britain is proud of its National Health Service (NHS). In 1948, the National Health Service Act stipulated that the government would provide virtually free medical care for all citizens. Physicians receive a salary plus a per-patient payment from the government. The NHS embodies the socialist philosophy that profit-driven markets are not the appropriate mechanism for allocating health care. Markets serve two functions simultaneously: (1) allocation of existing goods and services among competing buyers, and (2) motivation for producers to bring new goods and services to the market. The NHS was established to replace market-determined prices with prioritized waiting lists as the allocation mechanism among competing buyers. Recently, however, the NHS has embraced the profit motive as a mechanism for performing the second function. The Economist reported that the government has introduced mechanisms to allow hospitals and individual inventors to profit from their innovations.…For the scenarios below, identify the type of market failure, explain why it occurs and provide a solution: (1) An auto repair shop convinces you that you need a $20,000 valve job when all you need is an oil change. (2) Everyone in the neighbourhood would benefit if an empty lot were turned into a park but no entrepreneur will come forward to finance the transformation (3) A barking dog in the backyard
- ECON 201 (Section E) – Homework 4 Name: Question 1: Suppose the market for cigarettes can be represented by the following demand and supply Q = 5000 – 20P Q = 40P – 400 equations: a) Find the free market equilibrium: price, quantity, CS, PS, and TS. Graph the market below. b) Suppose the government comes in and adds a tax on each box of cigarettes sold and makes consumers pay for this tax (when they buy the good). The new demand curve with tax is Q = 5000 – 20(P + 10). Graph the situation below. Calculate the new equilibrium price and quantity with the tax; how much the tax is per box of cigarettes; the new CS, PS, Tax Revenue, and TS; the DWL the tax creates (if any). i. ii. ii. iv.Suppose you are asked to do a market analysis in an area in which a natural disaster has recently occurred. (An example might be Nashville after the spring floods or New Orleans after Hurricane Katrina.) Other than building supplies (which is too easy :), choose a market for a good or service that will be affected. Will demand or supply be affected? (Even if it might be both, just choose one or the other to keep it simpler). What happens to equilibrium prices and output in this market? Draw a supply and demand graph for your own use, and then explain the process in detail. Choose a market that has not already been chosen by a classmate. Be creative and thoughtful!For an output level below QE, the value of a unit to a buyer is the cost of a unit to a seller. Suppose a firm that produces for this market is able to influence the market price, which leads to an outcome that differs from the free market which is an example of equilibrium shown in the previous graph, Such a situation is characterized by
- Which of these is an example of market transactions? O O O Patients, since we have free choice of hospital in Norway Pharmaceuticals, including those paid for by the government. Traffic violations, since we pay a fine Voluntary work ("dugnad") on the local sports arenaConversely, show geometrically the effect of a decrease in Price (i.e., BELOW the equilibrium price). What “economic problem” is created now in the market. Measure geometrically he magnitude or distance of such “economic problem”. Again, in the face of such an economic problem, where private sector buyers and suppliers could not do anything more, which economic actor should come to intervene properly? Discuss what should that intervener do amidst such economic problem faced by the microeconomic actor – NOTABLY THE PRODUCER OR SELLER. As an Economist (or beyond the limits of Economic studies), what would you recommend to the VEGETABLE PRODUCERS and to the GOVERNMENT as well? Discuss exhaustively.Question Consider two individuals, Adam and Eve, who have the following in-verse demand curves and face a marginal cost curve below. PA = 100 1/2 Qa; PE = 200 Qe MC = 2/3 Q (a) If the good is private, what is the equilibrium price and quantity in a competitive market? Is this outcome ecient? (b) If the good is public, ecient provision implies what price and quantity in the market?