Question

LO4: Show why competitive markets fail to provide socially efficient levels of
public goods; explain how the government can mitigate these inefficiencies.

LO7: Show how government policies in international markets, such as quotas and
tariffs, impact the prices and quantities of domestic goods and services.

Please expert solve this managerial economics 2 questions

Answer 1

Why competitive market failed to provide socially efficient levels of public goods and how the government can mitigate these efficiencies.

Answer: market failure occurs when the price mechanism fails to account for all the costs and benefits necessary to provide & consumer good. The market will fail by not supplying the socially optimal amount of the good. Prior to market failure, the supply and demand within the market do not produce quantities of the goods where the prices reflect the marginal benefit of consumption. This imbalance causes allocative inefficiency. The structure of market system contributes to market failure. In the real world it is not possible for the market to be perfect due to inefficient producers, externalities, environmental concerns and lack of public goods.

During market failures the government can mitigate to this inefficiencies. This include,:

A. Legislation - enacting specific laws. For example putting a ban on smoking in restaurants .

B. Directly controlling the supply of goods that have positive externalities. For example education.

C. Taxation- government can impose taxes on those goods that are socially harmful like cigarettes and alcohols with an objective to discourage their consumption.

D. Subsidies- government can reduce the price of certain goods by providing subsidies.

E. Advertisement government can encourage or discourage the consumption of certain goods.

Question: show how government policies and international markets are the scooters interests in fact the price in quantities of domestic goods and services.

Answer: in order to protect domestic goods and services from foreign competition, government can use tariffs and quotas. Tariffs or a kind of tax on imported goods. They make imported goods more expensive and discourage their use. They are termed as import duties also. when import duties are levied on goods they become costlier , hence their demand is curtailed. Quotas fix the maximum amount of goods that can be imported. Does with the help of tariffs and quotas imports are restricted in the domestic economy and domestic goods and services are protected from foreign competition.

Through tariffs the price of imported goods rises and the demand in the domestic country falls.

Quotas are the limit that is fix on the quantity of goods that can be imported from other country. As a result the supply of foreign goods falls in the domestic market.

So we can say that this policy is of tariffs and quotas aim at protecting domestic goods and services from foreign goods.