Find an online article, post a link to it. Cite your source. Identify the type of...

Find an online article, post a link to it. Cite your source.

Identify the type of market failure. Is it a problem of negative externalities, positive externalities, public goods, or common resources? Could government action improve economic efficiency? Clearly explain your position.

Expert Solution

Ans: Market Failure: It refers to the state where allocation of resources are inefficient in the market.

Types of Market Failure:

1) Externalities

2) Monopoly Privileges

3) Information asymmetries

4) Factor Immobility

It is a problem of negative externalities because negative externalities refer to the situation where economic transaction i.e. production or consumption imposes the negative impact on external party.

Example of Negative Externalities:

Impact of smoking on non-smokers
Air pollution from road use and traffic congestions.

Improving economic efficiency: Governement can improve economis efficiency by following ways:

1) By providing infrastructure that permits markets to function properly.

2) Design laws in such a way to prevent business from making agreements or engaging in other behavior that limits competition and harms consumers.

3) By stepping in when markets are not working properly.

Rahul Sunny answered 2 years ago

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