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Purpose
This assignment gives students an opportunity to identify real-world market failures and consider how the government can address these issues. Categorizing a real problem will help students clearly distinguish the various types of market failure.
1. Find an article in a recent newspaper, magazine or on the Internet that illustrates market failure.
2. Identify the type of market failure. Is it a problem of negative externalities, positive externalities, public goods, or common resources? Explain.
3. Explain how government action can improve economic efficiency.
4. Graph the market failure and explain the problem. Then show how the government's action will change the situation.
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