Question

question 7
market failure and government intervention. the situations in questions 7, 8, and 9 are all examples of market failure. choose the correct reason for this to be the case.
3.a. collusion among several big companies in an industry so that they can control market prices
□ agents are not rational
☑ markets are not perfectly competitive
□ there are negative externalities present
□ distribution is not fair and just
□ the economy is not stable and growing

question 8
market failure and government intervention. the situations in questions 7, 8, and 9 are all examples of market failure. choose the correct reason for this to be the case.
3.b. loud nightclub in a quiet neighborhood
□ agents are not rational
□ markets are not perfectly competitive
☑ there are negative externalities present
□ distribution is not fair and just
□ the economy is not stable and growing

Explanation:

For Question 7:

Collusion by large companies to control market prices undermines the conditions of perfect competition (where no single entity can influence prices), which is a core cause of market failure here.

For Question 8:

A loud nightclub in a quiet neighborhood imposes an uncompensated negative cost (noise disturbance) on nearby residents, which is a classic example of a negative externality causing market failure.

Answer:

Question 7: B. Markets are not perfectly competitive
Question 8: C. There are negative externalities present