经济学导论OUTCOME3答案.doc

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1、Answerthefollowingquestions:1Whatismeantbypublicandmeritgoods?Giveanexampleofeach.2Meritgoodissociallydesirablebutwouldnotbeproducediflefttoprivatesector,egeducation.Publicgoodisgoodwhichcanbeconsumedbyeveryone.Wouldnotbeprovidedinfreemarketdueto‘freeriders’,egstreet

2、lighting.3ExplainwhytheGovernmentallowedthemergerofCarltonandGranadawhilerefusingTesco,SainsburyandASDAtheopportunityoftakingoverSafeway.AlternativetoQuestion2(Sampling)1Answershouldaddresstheareaofmarketfailureandwhygovernmentsintervene.Causesofmarketfailureshouldin

3、clude:¨restrictedcompetition¨noprovisionofpublicgoods¨insufficientprovisionofmeritgoods¨externalitiesignoredReasonsfordenialofsupermarkettakeover:¨creatingadominantfirmwithtoolargeashareofthemarketwhichrestrictscompetitionandwouldleadtoconsumerhavinglesschoice,paying

4、higherprices¨alsosupplierswouldsufferpressurefromnewpowerfulfirmReasonsforallowingTVmerger:¨differenttypeofmarketfromsupermarkets¨marketissufferingfromtoomuchcompetition¨advertisingrevenuewhichislimitedisspreadtoothinly¨newfirmhasstrengthtoproducenewproducts,bemoreef

5、ficient,reducecosts3Governmentsusetaxationpolicytoregulate‘negativeexternalities’.Oneoftheseisataxonfuelusedintransport.ExplainwhygovernmentstaxfuelandhowitaffectsthetransportmarketintheUK.3Fueltaxiswayofraisingrevenuebutalsousedastaxonexternalities.Anexplanationofwh

6、atexternalitiesareshouldbeincluded.Spentfuelcontributestopollutionwhichisanegativeexternality.ThecostisincurredbyeveryonewhethertheyusetransportornotGovernmenttaxesfueltocoverthecostofthisexternality.(Pigoviantax).Bymakinguseoffuelburningtransportmoreexpensive,govern

7、menthopestoreduceuseofcarsandtruckstherebyreducingcongestion,accidentsandpollution.Higherfuelcostsencourageconsumerstousepublictransportandsupplierstocounteractlowerdemandbyseekingtodevelopmorefuelefficientmethods.