1. There are several bridges along highway 280 which are free to ride on. This b
ID: 1218179 • Letter: 1
Question
1.
There are several bridges along highway 280 which are free to ride on. This bridge was built and is being maintained by the government... not the "free" market. Let's think about why that is the case... The economic logic of government ownership and having a marginal price of 0 (that is, it is free to cross the bridge) is:
There is no justification for government intervention here. This should be left to the free market.
2.
This question is based on The Economist Magazine's Schools Brief: State and Market - which has its own module in
Etudes Government intervention to correct a market failure:
has become more important as the damage of market failures has risen
3.
This question is based on The Economist Magazine's Schools Brief: State and Market - which has its own module in Etudes
In general the fundamental argument regarding market failures is that
the growing problems of market failure requires a further government effort to take corrective actions
4.
This question is based on The Economist Magazine's Schools Brief: State and Market - which has its own module in Etudes
The article begins by using the supply and demand model to illustrate the maximization of welfare in the sense that:
profits, and therefore, employment are maximized with a free market
5.
This question is based on The Economist Magazine's Schools Brief: State and Market - which has its own module in Etudes
The discussion of monopolies notes
that Microsoft is an example of a monopolist that leveraged its monopoly position to harm consumers
6.
This question is based on The Economist Magazine's Schools Brief: State and Market - which has its own module in Etudes
The discussion of public goods notes
There is no justification for government intervention here. This should be left to the free market.
2.
This question is based on The Economist Magazine's Schools Brief: State and Market - which has its own module in
Etudes Government intervention to correct a market failure:
A. faces the problem of the regulators being captured by the industry they are regulating B. has diminished in recent years - which is a bad thing C. has diminished in recent years - which is a good thing. D.has become more important as the damage of market failures has risen
3.
This question is based on The Economist Magazine's Schools Brief: State and Market - which has its own module in Etudes
In general the fundamental argument regarding market failures is that
A. the most damaging market failure is that of negative externality .. but the others are less damaging than assumed. B. the market often corrects the failures more efficiently than the government can when they intervense C. there really are no market failures in practice D.the growing problems of market failure requires a further government effort to take corrective actions
4.
This question is based on The Economist Magazine's Schools Brief: State and Market - which has its own module in Etudes
The article begins by using the supply and demand model to illustrate the maximization of welfare in the sense that:
profits, and therefore, employment are maximized with a free market
5.
This question is based on The Economist Magazine's Schools Brief: State and Market - which has its own module in Etudes
The discussion of monopolies notes
that Microsoft is an example of a monopolist that leveraged its monopoly position to harm consumers
6.
This question is based on The Economist Magazine's Schools Brief: State and Market - which has its own module in Etudes
The discussion of public goods notes
Explanation / Answer
1. There are several bridges along highway 280 which are free to ride on. This bridge was built and is being maintained by the government... not the "free" market. Let's think about why that is the case... The economic logic of government ownership and having a marginal price of 0 (that is, it is free to cross the bridge) is:
A. Bridges are public goods because they are non-excludable and non-rival. Public services such as construction of roads, bridges and dams are non – excludable and the government are the organization to spend the huge amount of investment required.
2. This question is based on The Economist Magazine's Schools Brief: State and Market - which has its own module in Etudes Government intervention to correct a market failure:
A. faces the problem of the regulators being captured by the industry they are regulating
The theory states that the market as well as the government on its own are prone to irregularity only when they function together, they keep a check on each other.
3. This question is based on The Economist Magazine's Schools Brief: State and Market - which has its own module in Etudes In general the fundamental argument regarding market failures is that
B. the market often corrects the failures more efficiently than the government can when they intervene. The belief is on the Adams Theory of invisible hand, the market has a self correcting mechanism in absence of any government intervention, the market works towards correcting the disparity.
4. This question is based on The Economist Magazine's Schools Brief: State and Market - which has its own module in Etudes The article begins by using the supply and demand model to illustrate the maximization of welfare in the sense that:
C. supply and demand curves assume conditions that are readily met in practice and the results can, therefore, be readily accepted
The market works towards equilibrium and in a free economy it is assumed that there is no intervention and the demand and supply work towards attainment of equilibrium.
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