Market failure refers to a situation in which the market does not allocate resources efficiently. ANSWER: T TYPE: T KEY1: D SECTION: 2 OBJECTIVE: 7 RANDOM: Y [cxxii]. Since taxes affect only the price paid by the buyer, they cannot have an adverse impact on the allocation of society’s resources. ANSWER: F TYPE: T KEY1: C SECTION: 2 OBJECTIVE: 7 RANDOM: Y [cxxiii]. A monopolist has market power.
One fallacy is that trade is a zero sum activity, if one trading party gains, the other must lost. 2. Imports reduce employment and act as a drag on the economy, while exports promote growth and employment. This fallacy stems from a failure to consider the link between imports and exports. 3.
It is also possible that managers do not adopt maximising behaviour at all, perhaps “satisficing” in response to shareholder discipline or that the policy of the firm is the result of complex interactions between various stakeholders. An For a firm to profit maximise, it would be the case that it sets output where marginal cost is equal to marginal revenue. If an additional unit of output were to be produced beyond this, it would add more to the firm’s costs of production than its revenue, thus reducing profit. The diagram below shows profit maximising output and the corresponding price, read from the demand curve. It also shows some other possible objectives for the firm.
These types of conditions keep firms from monopolizing the market. The final regulation ensures awareness of organizational goals which provides insight regarding how organizations will react to different price levels. Regulations for the perfect competitive market directly correlate supply to marginal cost methods. Without these regulations for the competitive market the formal concept for supply will be obsolete. Insights from the
In terms of consumerism, the good life is damaging to the environment, places too much emphasis on money, and it dwindles the importance of non-market values. According to Annie Leonard’s “The Story of Stuff”, our current materials economy is a commodity chain in which goods go from extraction, to production, to distribution, to consumption, and finally to disposal. The system sounds stable but it is actually in crisis. Anyone with a simple understanding of mathematics can tell you that you cannot run a linear system on a finite planet in the real world. In order for us, the consumers, to get all of our fancy products and up-to-date technologies, a process that we turn a blind eye to takes place.
Protectionism endanger a consumer’s right to choose from a wide variety of goods and services. The defense argument is that it protects higher prices, lower quality goods, economic stagnation and among other things. It is a form of purism when it comes to the trade barriers being in place. It is defended that is in place because consumers to purchasing foreign made products will cause unemployment here in America. The theory is that jobs are lost when we are tempted by cheap foreign goods.
The frontier belief wrongfully delivers this idea that it is ok to waste opportunities because there are far more than enough opportunities on the abundance of lands. The frontier belief never mentioned that the resources on our planet are limited, therefore, opportunities are also scarce. Instead of promoting the concept of having more, I believe thrift could be a valuable practice to promote. In essence, the frontier belief defines a sense of consumerism. As John Verdant introduces two families with similar economic conditions but completely different values, it is not difficult to find out that the family believes having more actually harms themselves (Verdant, 152-155).
Durkheim sees anomie as responsible for the world’s disorder of economics- the lack of morality and regulation resulted in overpowering the weak; thus, he feels that only norms can prevent the abuse of power and calls for regulation and equal opportunity from birth- the greater the equal opportunity the less need for restraint. Marx looked at how capitalism separated humanity by making work a simple means of individual existence. In addition he describes society in terms of class and economic conflicts. Marx saw proletariat or people of a working class as being underneath the bourgeoisie or the capitalist of a modern society. Marx looked at how alienation of production of commodities by workers also leads to alienation of social life.
They make their own prices, which would in most cases be more of a benefit to the producer. Both structures make it very difficult for others to enter the industry, limiting and sometimes blocking entry and competition. Industrial Regulation seeks to prevent unfair practices of restricting market entry, opening markets up for competition. Ideally, prices with regulate themselves in a fair competition, preventing one or a few companies from setting the prices that would be deemed as inappropriate. It also works to prevent the practices of unfair pricing and charging higher prices to consumers while the companies produce less product, limiting choices for consumers.
There are various ways in which a market failure occurs. A product might be under produced or not even produced at all and when this happens, their resources have been under allocated to the production of that product. If the opposite occurs and a product is over produced then its resources have been over allocated to its production. Market failure implies a loss of allocated efficiency. McConnell, Brue and Flynn define market failure in our text book as “the inability of a market to bring about the allocation of resources that best satisfies the wants of society; in particular, the over allocation or under allocation of resources to the production of a particular good or service because of externalizations or informational problems or