Week 5: Market Failure and Government Intervention

Market failure can arise from any number of reasons, including from monopolies, externalities, public goods, or asymmetric information.

In many cases, the extent of market failure is minor and government intervention is not deemed warranted, but in other cases where market failure can result in significant problems, intervention can reduce the social costs of market failure.

Because it is generally impossible to completely correct market failure, economists and policymakers are not always in an agreement between the benefits of trying to correct the costs to society caused by market failure and the problems that may arise from attempts to correct them.

The choice is most often between imperfect outcomes. Thus, the extent to which action is generally taken depends on the severity of the failure and the potential costs and benefits of correcting it.

This week, you will explore types of market failures and examine how government intervention can help prevent or correct them. In the Discussion, you will identify forms of market failure that personally affect you and define their causes, as well as the role of government regulation in those failures. In the Assignment, you will work as an economic consultant for XYZ Corporation to prepare a presentation for a client on market failure and government intervention.

Learning Objectives

Students will:

  • Define market failure
  • Differentiate among common forms of market failure
  • Explain the effects of market failure on business outcomes
  • Explain the role of government policy in correcting different types of market failure

Discussion: The Impact of Market Failure

When you think of forms of market failure, what comes to mind? Have you ever identified a market failure that has affected your job or industry? What about any products or services that you use or have used? Consider how these failures are addressed, if at all, by government entities or regulators. Does the intervention help to improve outcomes?

In this Discussion, you will identify and evaluate two or more forms of market failure that affect you, explain their causes, and explain the role of government intervention in addressing them.

To prepare for this Discussion:

  • Review this week’s Learning Resources, with an emphasis on the various forms of market failure and typical remedies for correcting them.
  • Identify two or three forms of market failure that affect you, such as a negative or positive externality, a public good provided by a local government, or asymmetric information about the safety of consumer products you purchase.
  • Review the Academic Writing Expectations for 1000-Level Courses, provided in this week’s Learning Resources.

By Day 3

Post a 150- to 225-word (2- to 3-paragraph) description of two forms of market failure you identified. In your description, address the following:

  • What are the causes of the market failure?
  • Explain whether or not government regulation is involved with correcting the market failures, and share your views on the success of the intervention.
  • To support your response, be sure to reference at least one properly cited scholarly source.

Refer to the Week 5 Discussion Rubric for specific grading elements and criteria. Your Instructor will use this grading rubric to assess your work.

Read some of your colleagues’ postings.

By Day 5

Respond with at least 75 words (1 paragraph) each to two or more of your colleagues’ postings by agreeing or disagreeing with their views on the appropriateness and success of government intervention or lack thereof with respect to one of the market failures identified. Support your position with examples and/or economic analysis.

Return to this Discussion in a few days to read the responses to your initial posting. Note what you have learned or any insights you have gained as a result of the comments your colleagues made.

Submission and Grading Information

Grading Criteria

To access your rubic:

Week 5 Discussion Rubic

Post by Day 3 and Respond by Day 5

To participate in this Discussion:

Week 5 Discussion

Assignment: Client Presentation on Globalization: Part 1

You are an economic consultant for XYZ Corporation who reports to the VP of Finance, Maria Horowitz. You learned that multiple departments of your company are collaborating to create a presentation for a prospective client that explains how XYZ Corporation can help them improve their business. Maria has been asked to present on several financial aspects of an organization. She asks you to develop the sections of the presentation for two topics: government intervention and globalization. The potential client, named Fourevr Enterprises, has stated they have a lack of understanding about governmental intervention and their business is projected to grow at a rate that has them concerned about factors such as externalities and market power. Additionally, Fourevr Enterprises has cited that they mostly operate domestically, both in terms of production and selling, because they are unfamiliar with and apprehensive to engage in globalization efforts.

For this Assignment, identify a product or service offered by Fourevr Enterprises and the industry that defines it. Select one that is or potentially can be involved in international trade and globalization. Some suggestions are:

  • Automobile or parts manufacturing
  • Pharmaceutical research and development (R&D) and manufacturing
  • Financial Industries
  • Software development
  • Entertainment/video games
  • Oil and gas exploration and production
  • Small businesses involved in importing and/or exporting consumer products

Maria has developed an outline of questions she would like to have addressed for the presentation and has placed them in the presentation template. She has tasked you with addressing the questions and filling out the presentation template.

In addition to responding to the prompts, you should include a cover slide, an Introduction to Fourevr Enterprises, and a References slide that includes all sources cited. Each content slide should also include detailed speaker’s notes that would be used to make the presentation to the leaders of Fourevr Enterprises. Use the presentation template provided to address the prompts.

To prepare for this Assignment:

  • Review this week’s Learning Resources; you may also want to review the characteristics of market structure from Week 4 to support your selection of a particular industry for Fourevr Enterprises.
  • Refer to the Academic Writing Expectations for 1000-Level Courses as you compose your Assignment.

By Day 7

Submit the first part of your presentation, which involves a discussion of government regulations and policies associated with “market failure.” Be sure to include the following:

  • Provide a brief introduction to Fourevr Enterprises, including type of business and industry and what types of products or services the company offers. (1 slide)
  • Define market failure and identify at least two of the most common forms of market failure. Select examples consistent with Fourevr’s operations (e.g., pollution controls for an oil and gas company, labeling requirements for a pharmaceutical company, intellectual property protection for an entertainment company, provision of public services such as police or fire protection, or publicly funded training programs to help train skilled manufacturing workers). (1–2 slides)
  • For each market failure identified, use graphs and economic models to explain the following (2–3 slides for each market failure):
    • The reason for the market failure
    • The possible or potential effects of the failure on Fourevr’s operations (whether positive or negative)
    • The role of government regulations/policy to correct each failure, and what effects those regulations might have on the company’s costs, revenues, and profits

Note: For each prompt, be sure to reference at least one scholarly source to support your answer. Use the Week 5 Assignment Template, provided in this week’s Learning Resources, to complete this Assignment.

Refer to the Week 5 Assignment Rubric for specific grading elements and criteria. Your Instructor will use this grading rubric to assess your work.

Submission and Grading Information

To submit your completed Assignment for review and grading, do the following:

  • Please save your Assignment using the naming convention “WK5Assgn+last name+first initial.(extension)” as the name.
  • Click the Week 5 Assignment Rubric to review the Grading Criteria for the Assignment.
  • Click the Week 5 Assignment link. You will also be able to “View Rubric” for grading criteria from this area.
  • Next, from the Attach File area, click on the Browse My Computer button. Find the document you saved as “WK5Assgn+last name+first initial.(extension)” and click Open.
  • If applicable: From the Plagiarism Tools area, click the checkbox for I agree to submit my paper(s) to the Global Reference Database.
  • Click on the Submit button to complete your submission.

Grading Criteria

To access your rubic:

Week 5 Discussion Rubic

Check Your Assignment Draft for Authenticity

To check your Assignment draft for authenticity:

Submit your Week 5 Assignment draft and review the originality report.

Submit Your Assignment by Day 7

To submit your Assignment:

Week 5 Assignment