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Each instance that follows is an example of one of the four types of market failure (imperfect market structure; the existence of public goods; the presence of external costs and benefits; and imperfect information). In each case, identify the type of market failure and defend your choice briefly.
a. An auto repair shop convinces you that you need a $2,000 valve job when all you really need is an oil change.
b. Everyone in a neighborhood would benefit if an empty lot were turned into a park, but no entrepreneur will come forward to finance the transformation.
c. Someone who lives in an apartment building buys a Gretchen Wilson CD and then blasts it at full volume at 3 A.M.
d. The only two airlines flying direct between St. Louis and Atlanta make an agreement to raise their prices.
Based upon marginal revenue or marginal cost analysis, explain how output and price are determined in monopolistically competitive markets.
Explain how this tax or subsidy would achieve the socially efficient level of output. Among the various interested parties - the monopoly firm, the monopoly's consumers, and other taxpayers - who would support the policy and who would oppose it?
Why is a common analysis period necessary in comparing mutually exclusive alternatives by the "Present Worth Method", but is not necessary in the "Equivalent Uniform Annual Cash Flow method"?
Describe the market growth rate for product and service.
What business will you go into, and what will comprise your fixed and variable costs? How could your business take advantage of economies of scale?
Examine the models of oligopoly and create at least one recommendation for improvement. Describe your rationale.
Draw a standard supply and demand diagram which shows the demand for new housing units that are purchased each month, and the supply of new units built and put on the market each month.
Discuss how the rights of those in the public sector differ from those in the private sector, and how it affects overall public sector productivity.
Suppose that the market for radios is perfectly competitive and there is the simultaneous increase in supply and demand. What can be said about the new equilibrium relative to one before the shifts in supply and demand occurred?
Assume the labor force decreases in size due to the large number of people reaching retirement age and subsequently entering retirement. At the same time real interest rates in the economy fall. What will happen in the economy?
Comment on the statement. Do you agree with the speaker? Explain. Use a graph to illustrate the answer indicating the firm's short-run cost structure
In the competitive market, the market demand is Qd=48 - 5p and the market supply is Qs = 7P. The equilibrium price is4
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