market failure slides to post

market failure slides to post - Market Failures • ...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Market Failures •  Accessing the Readings on Blackboard? •  Policy Memo instruc;ons I ­Clickers •  TEST QUESTION 1. – When I say go, please click “A”. •  If you are not registered (name in Red), write down your name and i ­clicker ID on paper. Turn this in at the end of class. •  Last week we discussed the power of the free market. – Law of Supply and Demand is Pareto Efficient – Economic Growth What is market failure? •  What sorts of things occur when markets fail? How do you iden;fy market failure? •  What are real ­life examples of market failure? Condi;ons for Market Efficiency •  Compe;;on •  Informa;on •  Mobility •  When these condi;ons are met, the market is Pareto Efficient. Societal Perspec;ve •  Society’s care about more that Pareto Efficiency. •  Free markets balance private costs with private benefits NOT societal ­wide costs with societal ­wide benefits. •  Society may reject the distribu;on of goods provided. Condi;ons for Market Failure •  Economic Jus;ce •  Externality •  Public Goods Economic Jus;ce •  In what circumstances do you think should governments correct economic injus;ces? •  What are examples of government correc;ons of economic injus;ces? Externali;es •  What are posi;ve and nega;ve externali;es? •  What are the consequences of externali;es? •  Which types of externali;es do you think deserve government interven;on? •  What are some examples of government interven;on to correct market failures from externali;es? Public Goods •  What are the differences between public and private goods? •  Why don’t markets frequently provide public goods? •  What are examples of public goods that governments provide? CLASS ACTIVITY •  You are the CEO of a Widget manufacturing company. Your classmates all represents compe;ng companies. •  Your goal as CEO: maximize profits – Extra credit will be given to the student with the highest profits at the end of three rounds •  You have a choice to invest in your own company, or in a communal R&D Fund. – For every dollar you invest in your own company, you earn $4 in profits + the total amount contributed to the R&D fund by other firms – For every dollar you invest in the R&D Fund, you earn $1 in profit + the total amount contributed to the R&D fund by other firms •  The fruits of personal investments are private. •  The fruits of R&D fund investments are public, all firms benefit. •  You will make your investment decisions by making choices using your i ­clicker. – You have $2 to invest. – Choice A: Invest all $2 in own company – Choice B: Invest $1 in own company, $1 in R&D Fund – Choice C: Invest all $2 in R&D Fund Quiz •  How much money would you earn if you invest $2 in your own company? – A: $ 2 – B: $2 + Others’ Contribu;ons to the R&D Fund – C: $8 – D: $8 + Others’ Contribu;ons to the R&D Fund Quiz •  How much money would you earn if you invest $2 in the R&D Fund? – A: $ 2 – B: $2 + Others’ Contribu;ons to the R&D Fund – C: $8 – D: $8 + Others’ Contribu;ons to the R&D Fund Quiz •  There are 10 firms. If all firms completely invest in the R&D Fund ($2 each), what will be each firms’ profit? – A: $10 – B: $18 – C: $20 – D: $22 Quiz •  There are 10 firms. If all firms completely invest in their own companies ($2 each), what will be each firms’ profit? – A: $2 – B: $4 – C: $8 – D: $20 Reading Quiz •  According to Coase, the lighthouse is a good example of a public good that should be provided by the government? • A: True • B: False •  What do you think? Should lighthouses by provided by governments? – Know pro and con arguments for this specific case ...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online