Market efficiency and market failure

Business

1 answer:

bulgar [2K]3 years ago

8 0

Missing Part of Question:

The related graph was not present with the original question, so I am attaching it here.

Explanation:

$Q_{E} \;=\;Equilibrium\;Quantity\\$

(a) In a free market, at a quantity exactly equal to $Q_{E}$ , the value of a unit to a buyer is equal to the cost of a unit to a seller. For a quantity below $Q_{E}$ , the value of unit to a buyer is greater than the cost of that product to the seller. Finally, for a quantity above $Q_{E}$ , the value of that unit to the buyer is less than the cost incurred by the seller.

(b) The dumping of toxic chemicals is a typical scenario of Negative Externality which may lead to Market Failure due to poor display of supplier reputation.

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