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POSC 182 Lecture 22 2010

POSC 182 Lecture 22 2010 - POSC 182 Politics and Economic...

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POSC 182: Politics and Economic Policy Unit 3: Policy Tools and Divergent Economic Philosophies Lecture 22: Regulation February 26, 2010
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Market Failure Market Failure : When markets by themselves are unable to correct for over- or under-supply of goods or services. Types of Market Failures: Lack of Competition Monopoly Standard Oil Company controlled over 90% of oil by the early 1900s by constricting the use of oil pipes Microsoft Windows (Microsoft must allow choice of web browsers in Europe) Unequal Bargaining Power Workers may not be able to bargain on equal footing for certain conditions vis-à- vis large corporations OSHA regulates working conditions Lack of demand due to high prices: Infant industries Demand for a product may emerge, but there may be high barriers to entry into a market if a country hasn’t achieved economies of scale to drive prices down to make it economical for people to buy a product Airbus in Europe or Shipbuilding in Korea
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Market Failure Information Problems Information may be difficult/costly for consumers to obtain Drug safety requires testing new drugs on large numbers to identify the effects and side effects. Incomplete or misleading information Firms may have an incentive to mislead people. Although the market may eventually punish such firms, it may be costly to the public in the meantime
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  • Spring '08
  • SCHUELENBERG
  • Market failure, Standard oil, Occupational safety and health, environmental protection agency, Externality, Agency (EPA)

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