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Find an example of a market with a lemons problem, and give facts of market solutions.
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- What is the Samuelson Rule? Why does the market outcome, based on the actions of rational, self-interested individuals will deviate from the results of the Samuelson RuleGive three definitions of market efficiency used by economists. How does efficiency fit into the definition of market failure given by economists? Which market structure represents a failing market the least likely?Describe at least three reasons why market failure occurs.
- Suppose the Environmental Protection Agency (EPA) wants to mandate that all methane emissions must be reduced to zero in order to alleviate global warming in the United States. Which of the following describes why most economists would disagree with this policy? Reducing methane emissions is desirable, but whatever levels of pollution firms decide to emit privately are already efficient. Society would not benefit from lower air pollution. The environment isn’t worth protecting. The opportunity cost of zero pollution is much higher than its benefit.If A has TIOLI power in an exchange, which of the following are true? a. Person A will capture most or all of the gains from trade. b. Person B will lose utility compared to their initial endowment. c. A Pareto-efficient outcome is assured. d. Person B could gain utility if they agree to A's offer.If equilibrium is compatible with both buyers’ and sellers’ intentions, how can it be undesirable?
- Offer an example of a market where you consider the real-world outcome to be unacceptable. Why is the market outcome unacceptable?Scenario 4 Suppose there are two residents in a neighborhood, Tana and Jason. Tana's demand for clean streets is Q = 100 – 4P. Jason's demand for clean streets is Q = 80 – 2P. If your answer is not a whole number, please make sure to round to the nearest hundredth. Refer to Scenario 4. Find the social demand curve for clean streets in this neighborhood. What is the y-intercept of the social demand curve? (Do not enter a dollar sign in your answer)If there are no externalities or market power and all markets are in equilibrium, what conclusions can we draw from this in economic theory?
- Should Jake have done something about Bob’s work prior to being placed in this dilemma? Discuss FIVE [5] possibilities for Jake.Thelma owns a cat which wakes up her roommate Louise at 6am every morning. Thelma enjoys cat ownership, but Louise bears a cost of Thelma's ownership of the cat. Assuming that Louise has the legal right to sleep as long as she likes, which action is necessary? if Thelma's benefit exceeds Louise's cost, government intervention is necessary if Louise's cost exceeds Thelma 's benefit, Thelma will pay Louise to keep her cat Thelma will pay Louise to be able to keep the cat if her benefit exceeds Louise's cost if Louise has the legal right to sleep, she only has to pay Thelma when her cost is below Thelma's benefitConsider the above graph. Is there an externality present in this market? If so, what kind? No, there is no externality. Yes, a negative externality. Yes, a positive externality.