Markets are one way of determining what an economy produces, how it produces, and how the products are allocated.

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Written paper Summary: Markets are one way of determining what an economy produces, how it produces, and how the products are allocated. Advocates of free markets claim that this approach results in socially optimal outcomes, yet it is commonly accepted that cases of market failure lead to sub-optimal outcomes. Select ONE of the drivers of market failure listed below:

 

Asymmetric information Positive externalities Public goods Write 600 words (+/- 10%) to address the following points: Describe what is meant by the term, and give an example Comment on how prevalent such cases are in the economy Describe what is meant by “socially optimal outcomes” according to microeconomic theory Discuss how and why, when this type of market failure exists,

 

the market fails to reach the socially optimal outcome Use a supply and demand chart to show 1) the market outcome, 2) the socially optimal outcome, and 3) how they differ in terms of quantities and prices when this type of market failure exists Discuss what government interventions can be applied to steer the market towards socially preferable outcomes You should cite our textbook as: Ayers, R.M. & Collinge, R.A. (2005).

 

Microeconomics – Explore & Apply. Pearson Prentice Hall. In-text citation: (Ayers and Collinge, 2005) You should cite information from the lecture as: Leonard, D.M. (2022). Microeconomics (personal communication) Modul University Vienna, Austria. In-text citation: (Leonard, 2022)

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