ECON 208 Lecture Notes - Imperfect Competition, Market Power, Market Failure

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13 Jul 2012

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ECON 208 Full Course Notes

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The operative choice is between which mix of markets and government intervention best suits people"s hopes and needs. When government"s monopoly of violence is secure and functions with restrictions against its arbitrary use, citizens can safely carry on their ordinary economic and social activities. The first duty of the sovereign is that of protecting the society for the violence and invasion of other independent adam smith. The formal case for free markets is based on the concept of allocative efficiency (allocative efficiency is the reason why capitalist/free market is best market, but this is based on assumptions that the market has no flaws/failures) A centralized market system adjusts quickly to changes. As market conditions change, prices in a market economy also change. Not everyone having the same privileges and consequences = bad policy (ex. Lehman brothers was allowed to fail, other banks were bailed out) A market system coordinates without anyone needing to understand how the whole system works.

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Adam Smith once said, "The first duty of the sovereign [is] that of protecting the society from the violence and invasion of other independent societies, [which] can be performed only by means of a military force."

What does this quote mean?

Thank you !

Also, give an example.

bronzereindeer692

Adam Smith usually referred to as the father of Economics expounded the theory of free markets and opposed any form of concentration of economic power. He believed that any authority establishing a price that provided a fair price to the providers of the factors of production would distort the market's natural ability to determine prices and output levels. In general, he believed that competitive markets would allocate resources to their highest and best use. However, in recent times, we have seen the market mechanism fail and allocate too many or too few resources to the consumption or production of some goods and services.

-What are some of the reasons for this failure? -Has government intervention into competitive markets changed the efficiency of these markets? Why or why not?

-Was Smith correct or incorrect in his theories concerning the efficiency of the markets in the allocation of resources?

Support your answers with examples and references. Justify your choices with valid assumptions and logically driven arguments.

sangriahorse340

Adam Smith, usually referred to as the father of economics, expounded the theory of free markets and opposed any form of concentration of economic power. He believed that any authority establishing a price that provided a fair price to the providers of the factors of production would distort the market's natural ability to determine prices and output levels. In general, he believed that competitive markets would allocate resources to their highest and best use. However, in recent times, we have seen the market mechanism fail and allocate too many or too few resources to the consumption or production of some goods and services.

What are some of the reasons for this failure?

Has government intervention into competitive markets changed the efficiency of these markets? Why or why not?

Was Smith correct or incorrect in his theories concerning the efficiency of the markets in the allocation of resources? Support your answers with examples and references.

Justify your choices with valid assumptions and logically driven arguments. Cite any sources using APA format.

emeraldmallard910

ECON 208 Lecture Notes - Imperfect Competition, Market Power, Market Failure

ECON 208 Full Course Notes

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