Economics - Headway

Standard 8: Market failures occur when markets fail to allocate resources effiently or meet other goals, and this often leads to government attempts to correct the problem.

Benchmark - 9.2.4.8.1 - Identify and analyze market failures caused by a lack of competition, lack of resource mobility (barriers), and lack of perfect information, evaluate the rationale and effectiveness of government attempts to remedy these problems.
Markets can fail due to factors such as;  a lack of competition, lack of resource mobility (barriers),and lack of perfect information.  This powerpoint focuses on external factors that cause market failure and the effectiveness and reationale of government attempts to remedy these problems.

 Government attempts to remedy problems through the legal system and gov't agencies such as the Environmental Protection Agency (EPA), Dep't of Natural Resources, O.S.H.A., and many more different agencies.

     Your task is to go through the powerpoint and answer the questions below the link on this page.  It may be easier to have two screens open when going through the assignment.

 

                     http://faculty.riohondo.edu/mjavanmard/Booyes%20Micro/Marketextern.ppt

 

 

1. When does a market failure occur?

2.  Describe what a negative externality might be.

3.  Looking at the first graph, where is the market externality located?

4.  Is the competetive price too low or too high in this diagram?

5.  What does Ss stand for in the diagram?

6.  Describe the result of a positive external force affecting the market.

7.  How would internalizing the cost and benefits of a pollution tax effect a company?

8.  Give an example of the government commanding the economic market.