TAILIEUCHUNG - THẠC SỸ KINH TẾ - KINH TẾ VI MÔ - CHAPTER 7

In its broadest definitional sense, collective action is the enactment and enforcement of law. The justification for all collective action, for government, lies in its ability to make men better off. This is where any discussion of the bases for collective action must begin. | CHAPTER 7 Market Failures External Costs and Benefits In its broadest definitional sense collective action is the enactment and enforcement of law. The justification for all collective action for government lies in its ability to make men better off. This is where any discussion of the bases for collective action must begin. James Buchanan How much should government involve itself in the marketplace How much does business want government involvement. These questions touch on one of the most important economic issues of our time the division of responsibility between the public and private sectors. In general economic principles would suggest that government undertake only functions that it can perform more efficiently than the market. As we will see businesses are not always opposed to government involvement in the economy. Indeed many businesses have incentives to try to make sure that government is more involved in the economy than is efficient. Economics provides a method for evaluating the relative efficiency of government and the marketplace. It enables the United States to identify which goods and services the market will fail to produce altogether and which it will produce inefficiently. We saw in an earlier chapter that such market failures have three sources monopoly power external costs and external benefits. Now using the principles and graphic analyses developed in earlier chapters we will take a closer look at external costs and benefits and at government attempts to capture them and correct market failures. See later chapters on monopoly and monopsony power. External Costs and Benefits Again In a competitive market producers must minimize their production costs in order to lower their prices increase their production levels and improve the quality of their products. Consumers must demonstrate how much they will pay for a product and in what amount they will buy it. In a competitive market production will move toward the intersection of the market .

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