Question

complete the following table by classifying the source of market failure in each case.

market failure	market power	externality
a sewage company opened a wastewater treatment facility near a housing plan, introducing unwanted smells.	○	○

Explanation:

To solve this, we analyze each market failure case:

Case 1: Single cable provider (internet)

• Market Power: Exists when a firm (monopoly, here) controls price/output. A single cable provider is a monopoly, so it has market power.
• Externality: No external cost/benefit to third parties here (just price control), so not an externality.

Case 2: Sewage company (wastewater facility)

• Market Power: No monopoly/price control here.
• Externality: The unwanted smells affect nearby residents (third parties) with a negative externality.

Filling the Table:

Market Failure	Market Power	Externality
A sewage company... introducing unwanted smells.	$\circ$	$\boldsymbol{\circ}$ (select)

(Note: In the table, "select" means clicking the circle for that category.)

Answer:

To solve this, we analyze each market failure case:

Case 1: Single cable provider (internet)

• Market Power: Exists when a firm (monopoly, here) controls price/output. A single cable provider is a monopoly, so it has market power.
• Externality: No external cost/benefit to third parties here (just price control), so not an externality.

Case 2: Sewage company (wastewater facility)

• Market Power: No monopoly/price control here.
• Externality: The unwanted smells affect nearby residents (third parties) with a negative externality.

Filling the Table:

Market Failure	Market Power	Externality
A sewage company... introducing unwanted smells.	$\circ$	$\boldsymbol{\circ}$ (select)

(Note: In the table, "select" means clicking the circle for that category.)