9. Market efficiency and market failure Suppose that the following graph shows a

Question

9. Market efficiency and market failure Suppose that the following graph shows a free market equilibrium, with o as the equilibrium quantity 1,9 Supply Demand QUANTITY "the cost of a For an output level below r, the value of a unit to a buyer is unit to a seller. Suppose a firm that produces for this market is able to dump toxic chemicals into a river next to its factory, which poisons wildlife and harms the health of nearby residents, who have no business with the company. This scenario is characterized by is an example of , which

Explanation / Answer

For an ouput level below Qe,The value of a unit to a buyer greater than the cost of a unit to a seller.

Suppose a firm that produces for this market is able to dump toxic chemicals into a river next to its factory, which positions wildlife and harms the health of nearby residents, who have no business with the company.The scenario is characterized by a market power ,which is an example of inefficiency

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