BCOR%203010%20Class%2010(2)

BCOR%203010%20Class%2010(2) - purchasing and applying salt....

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BCOR3010 Class #10: Market Failures/Nonmarket Failures
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Today’s Business 1. “Market Failures:” Rhetorical or Real? Do they justify government’s intervention in the market (its constraint on business’ pursuit of its own self- interest) for the greater good? 2. “Nonmarket Failures:” Is the Solution More Painful than the Problem? 2
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Zerbe and McCurdy: “The End of Market Failure:”Transaction Costs Suppose that one party suffers from the effects of pollution from a neighboring source. The pollution damage is $125,000 and the costs of installing devices to eliminate that pollution is $100,000 . By how much is pollution overproduced? What is the net gain? Should the project be undertaken? 3
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Zerbe and McCurdy, “The End of Market Failures: The Salt Dilemma,” p.13 Highways de-ice roads with salt because clear roads are more valuable than the price of
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Unformatted text preview: purchasing and applying salt. Salt is five times cheaper than an alternative, calcium magnesium acetate (CMA). The EPA estimates that the harmful environmental effects of salting roads (on cars, roads, bridges) is $2.91 billion, but if CMA were used, then this damage would be only $1.01 billion. The price of CMA is $1 billion dollars higher than the price of salt. Which approach should we use and why? 4 Hurricane Katrina Responses Groups 1-4 you are FEDEX, Group 5-8 you are Wal-Mart Groups 9-12 you are Home Depot 5 Questions on Hurricane Katrina What did your company do in response to the crisis? Should your company have done what it did? (Do these actions fall within your notion of the role of business?) Could the government have addressed these problems? Why or why not? 6...
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BCOR%203010%20Class%2010(2) - purchasing and applying salt....

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