ECON 2010 Lecture Notes - Lecture 5: The Seller, Market Power, Market Failure

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1 Oct 2015

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If well defined, property rights give individuals the incentive to use their property efficiently. Air pollution is very common because it is not technically simple to define air property rights. The market system can only work if the government enforces the rules. Government defines and protects the rights of people and their property through the legal system and police protection. By providing rules and regulations, government can make markets work more efficiently. Developers wanted to build a mall and evicted people living at the expected mall site because they could make more money from the mall than they could from the property owners. This was the first collectively decided commercial taking of property rights. One of the key functions of government is to provide a legal framework that protects and enforces property rights and contracts. Property rights also include intellectual property the property rights that an owner receives through patents, copyrights and trademarks.

Related Questions

1. Which of the following would be classified as a situation where a third party benefits from a market transaction by others?

A. City buying 10,000 trees for green space renewal projects

B. Two firms trading pollution credits to avoid cutting their toxic emissions

C. Allowing a mining company to use a natural lake to discharge waste

D. Increased levels of air pollution in neighborhoods near a football stadium

2. Which of the following is an example of an economic activity that can injure the environment? (Choose all that apply)

A. Excessive clear-cutting of wood resources by logging companies

B. Paper mill discharging raw chemical waste into a river

C. Gold mine discharging arsenic into a natural lake that it's using for a tailings pond

3. A number of different government policies can increase the incentive to innovate, including (Choose all that apply)

A. Regulations requiring more investment in innovation

B. Patent protection to guarantee intellectual property rights

C. Government assistance with the costs of research and development

4. Which of the following are ways in which the government promotes positive externalities? (Choose all that apply)

A. Spending on research and development

B. Protection of intellectual property

C. Incentives for increasing output

5. Which of the following are examples of market-based policies, rather than command-and-control policies? (Choose all that apply)

A. The federal government pays fishermen to preserve wild salmon

B. The federal government requires domestic auto companies to improve car emissions

C. A state charges an emissions tax on the quantity of carbon emitted by each firm

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We hear so much about the depletion of the ozone, the destruction of the rain forest, the pollution of the oceans and rivers, and the depletion of wildlife because

a. private individuals and businesses lack the time to take full account of these issues.

b. private individuals and businesses donï¿½t care about our environment.

c. scientists are looking to make names for themselves and thereby gain a lot of publicity.

d. the media focuses on negative stories.

e. private individuals and businesses lack incentives to take full account of the consequences of their actions.

4. An externality exists when

a. some of the costs of producing a product affect people unable, within a market system, to influence how much of a product should be produced.

b. only the buyers and sellers are affected by the production of a product or service.

c. every person in a market system has a chance to influence how much of a product should be produced.

d. the benefits from consuming the service affect only the purchasers of that service.

e. the costs of producing a service affect only the sellers of that service.

Why are chickens and cows not listed on the endangered species list?

a. People want to eat chickens and cows.

b. People cannot own a chicken or a cow.

c. Chickens and cows reproduce regularly.

d. Private property rights exist for chicken and cows.

e. People will pay to have chicken or beef.

10. Public radio raises its funding by staging telethons where no programs are aired for a period of time as the station solicits contributions. The stations have trouble raising money because

a. the government assigns private property rights to goods.

b. the consumption of a good cannot be limited to the person who purchased it.

c. the broadcasts are private.

d. people do not act in their own self-interest.

e. a monopoly produces a good.

The United States is a major trading partner for many nations because of the

a. size of the U.S. economy and its relatively high level of income.

b. free market benefits of capitalism.

c. commitment of the United States to help immigrants by both importing from and exporting to their countries of origin.

d. active participation of the United States in both the International Monetary Fund and the World Bank.

e. protection to shipping offered by the U.S. strategic presence in vital commercial areas, such as the Middle East.

18. Which of the following statements about international trade restrictions is true?

a. They typically benefit foreign producers at the expense of domestic consumers.

b. They ensure that countries will specialize in those products which they can produce most efficiently.

c. In the majority of cases they harm consumers.

d. They ensure that only efficient producers survive.

e. They ensure that higher-quality goods are provided at lower prices.

The primary costs of FDI to host countries are:

		Loss of sovereignty and patriotism
		Adverse effects on competition and exports
		Capital outflow
		Loss of sovereignty, adverse effects on competition, and capital outflow

____ suggests that FDI, unrestricted by government intervention, will enable countries to tap into their absolute or comparative advantage by specializing in the production of certain goods or services.

		The radical view
		The free market view
		Pragmatic nationalism
		Expropriation

What are the benefits of FDI to home countries?

		Repatriated earnings from profits from FDI.
		Increased exports of components and services to host countries.
		Learning via FDI from operations abroad.
		All of these answers

When one firm enters a foreign country through FDI, its rivals are likely to follow by undertaking additional FDI in a host country to:

		Create knowledge spillover
		Discover a new market for its goods
		Overcome and combat market failure through FDI
		Acquire location advantages or neutralize the first moverâs location advantages

Most countries practice:

		Pragmatic nationalism
		Free market based FDI
		Government embracing radical view
		French patriotism

FDI may be viewed as a reflection of firm motivation to extend firm-specific capabilities abroad and their responses to overcome imperfections and failures.

		True
		False

Most countries practice a totally "free market" view.

		True
		False

8. Outsourcing is the process of turning over an organizational activity to an outside supplier, located in a foreign country, which will perform it on behalf of the local firm.

		True
		False

Financial, physical, and technological resources and capabilities are all tangible assets.

		True
		False

A firm's resources and capabilities are tangible assets a firm uses to choose and implement its strategies.

		True
		False

An example of low power distance would be when subordinates address their bosses on a first-name basis.

		True
		False

Benchmarking is an assessment as to whether a firm has resources and capabilities to perform a particular activity in a manner superior to competitors.

		True
		False

A country with low-masculinity has a more subtle differentiation between the gender roles.

		True
		False

Setting up subsidiaries abroad so the work can be performed in-house but in the foreign location is also called captive sourcing.

		True
		False

Managers in low uncertainty avoidance countries rely more on experience and training than managers in high uncertainty avoidance countries who rely more on rules.

		True
		False

Informal institutions include laws, regulations, and rules.

		True
		False

The United States is often classified as a collective society.

		True
		False

A pure market economy characterized by the "invisible hand" of market forces is noted by

		John Stuart Mill
		Adam Smith
		Aristotle
		Amatya Zen

Culture is defined in the text as:

		The communication between members of similar location.
		The collective programming of the mind, which distinguishes the members of one group or category of people from another.
		The main component of formal institutions.
		The attitudes and behaviors characteristic of a particular social group or organization.

When an expat employee returns to her or his current employer but the employer does not provide attractive opportunities, she/he often may be hired by a competitor firm. Why?

		Competitor firms are also interested in globalizing their business.
		Former expats bring instant expertise and experience.
		Competing firms will pay a higher premium for expertise.
		All of these answers

The government taking a "hands-off approach" is known as:

		Laissez faire
		Command economy
		Mixed economy
		Liberal approach

Expatriate managers make ideal candidates for top management positions.

		True
		False

____ are defined as rights associated with the ownership of intellectual property.

		Patents
		Copyrights
		Trademarks
		Intellectual property rights

In a collective society:

		Family units are highly valued.
		Being an entrepreneur is a popular mindset
		Being different than your neighbor is important.
		Outsiders are easily trusted.

Which of the following definitions best defines an expatriate manager?

		A manager who works outside his or her native country
		A manager of great expertise
		An ex-manager rehired for advisory purposes
		None of these answers

ECON 2010 Lecture Notes - Lecture 5: The Seller, Market Power, Market Failure

ECON 2010 Full Course Notes

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