lecture9 - Introductory Microeconomics LECTURE 9 MARKET...

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Introductory Microeconomics LECTURE 9 – MARKET FAILURE 1: EXTERNALITIES Assignment 1 : i) Due on April 12, by 2pm. Submit in pdf format. ii) Do not use colors in the graphs; label all your graphs. (iii) Word limit. (iv) Check ‘Assessments’ link on LMS for hints and samples. (v) Pitstops – see ‘Announcements’ for times and locations. (vi) Tutor consultations/OLT. 1
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1. Two examples of government intervention • Empty bottles and cans (‘Victorian Premier Denis Napthine backs cash-for-cans recycling scheme’, The Age , 23 March 2014) - Why are empty bottles and cans a problem? - What proposals have been made to solve the problem? - Why won’t the market equilibrium get us to the best outcome? • Vaccination (‘Thundering herd: California’s anti-vaccine brigade and the dark side of individualism’, The Economist , 26 September 2015) - Why are some parents against immunization? - What actions do governments take to solve this problem? 2
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2. Introduction to market failure • So far: Competitive market equilibrium is efficient (i.e., it maximizes the sum of producer and consumer surplus). • However, sometimes markets fail to achieve the efficient outcome.
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