Question

(a) 30 marks Outline and explain in detail four types of market failure. What types of problems do market failures give rise to in the economy? Please give an example for each of the market failures you have outlined. Diagrams are not required in this question. (approx 300 words)

(b) 10 marks Does market failure automatically mean that the government should intervene to deal with the problem? Explain your answer. This question refers to market failure as a whole and not to a particular type of market failure. (approx 150 words)

(c) 20 marks The government is considering building a major infrastructure project at a cost of €200m. The expected benefits of the project are €500m. (i) Based on the Kaldor-Hicks criteria should the government implement this project? Justify your answer. (ii) A project that satisfies the Kaldor-Hicks criteria is always guaranteed to increase aggregate welfare. True or false? Explain your answer using a numerical example. In your example use the cost and benefits of the project outlined above. (approx 250 words)

(d) 20 marks What is (i) shadow pricing and (ii) discounting and why are they so important in costbenefit analysis? (approx 250 words)

Answer 1

We are authorized to answer one question at a time, since you have not mentioned which question you are looking for, so we are answering the first one, please repost your other question separately if you want to get answered.

The four types of market failures are the public goods, market control and there have been the externalities along with the imperfect information. To further work per the public goods causes that can cause the inefficiency and there are non-formers excluded from consumption that can be preventive per the voluntary market exchanges.

Externalities

Depending on the externality how there can be core existence and how it can work in terms of the exists depending on the benefits that can create the demand price or a cost that would not be working per the supply price. Another is the demand price which would not reflect the complete value depending on the good produced along with the supply price does not that can lead to the complete value of goods which would not be produced. Depending on the, market equilibrium which would not work over the efficient allocation.

Market Control

Market control needs to bring out the buyers or sellers that can be connected to the exert influence along with working in terms of good and/or the quantity exchanged. Depending on the control the market, it is also essential to note how their can be market price and it would result in the prevention to match with the market that can be worked with the equating demand price and supply price.

Public Goods

Public goods that can connect with the goods that can work per consumed simultaneously that can dependent on large number of people which would be worked per the consumption that can note the imposing an opportunity cost and how relation would be depending on the nontrivial consumption. Another is dependent on the inability that can work per the nonpayers from consumption. Depending on the Nontrivial consumption that can work per the public goods that can work efficiently allocated that can dependent on zero price, that can analyses the market to seldom inclined to do. Having an inability that can work nonpayers depending on the free-rider problem that can connect with the voluntary exchange of public goods through markets.

Market Efficiency

The relation depending on specific to the failings of markets and how it would consider the perfection work per the market efficiency. To note how their can be efficiency relation to allocation of resources that can be achieved per the value of the allocation of resources.