Reference no: EM13551526

Here are a few example of market failures. In each case, identify the type of market failure and explain why it compromises efficiency.

a) The partial expropriation of an oil company in Argentina has investors worried about investing in the country

b) Ecologists worry that pandas are endangered as their habitat is disappearing

c) Industries release sulfur dioxide and nitrogen oxide into the air. These pollutants cause acid rain, which affects ecosystems

d) The Abbey of Saint Sixtus of Westvleteren in Belgium produces a beer called Westvleteren 12, which lovers of fine beer widely consider as the best beer in the world. However, the monks have no interest in profitability and accept to sell only just enough beer to pay for their living expenses. The allocation is done essentially via a line-up system in front of the abbey and the bottles are sold at 1.67 euros per bottle. Given this low price, limited supply and high demand, those who could afford the time and money to travel to the monastery to buy the beer ended up acting as suppliers in a secondary markets where "demand" came from those who can't afford the trip to the monastery. Indeed, some beer lovers in North America for instance were willing to pay up to a hundred dollars for a buyer in Belgium to ship them a single bottle of this holy grail of brewing (there's all kinds of people in the world!). When they were made aware that their beer was being resold at much higher prices on those resell markets, the monks decided to require that every buyer sign a contract in which they promise not to resell the bottles they bought.