Market failure might exist simultaneously

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Q1. Immediately following the attack on the United States on September 11, 2001, the stock plunged and many observers predicted a recession. Using the consumption and investment function, elucidate their prediction.

Q2. When we covered market failures, we never entertained the possibility that more than one market failure might exist simultaneously. Very weird things can happen when there are multiple market failures. For example, analyze the case of the "monopoly polluter." Explain how that the deadweight loss in this case might be less than if only one of the market failures (i.e., the monopoly or the polluter) existed alone. Describe the simple logic of why this is the case.

Reference no: EM139338

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