Question

1. Contrast the kinds of market failure that lead to regulation of automobile safety as opposed to regulation of automobile emissions. In which case does a market exist that, i t wete perfectly, would promote an efficient outcome? What kinds failure? of impediments might lead to market

Answer 1

Adam smith,the economist is the publisher of "wealth of nations" and he pointed out that, The invisible hands of the market should be independent or they should be freed inorder to provide a qualitative and quantitative goods and services which are needed or demanded by the consumers.

In the absence of imperfect market the impact of supply and demand will provide or produce an effective allocation of the resources without the government support and this is an important role or contribution of economic analysis. The market failure of automobiles occurs due to several reasons some of them are,

1. Over or under production of automobile services
2. Production of ineffective quality of service.
3. High cost for the production of a given output and which is an unnecessary factor.

The imperfections which leads tho the automobile service regulation are,

1. congestion (Traffic problems)
2. Leads to pollution mainly air pollution
3. Indeterminacy of the state of equilibrium
4. Impediments which leads to the price competition,

• The impediments involves the cruising cabs that is the automobiles which are moving without a particular destinations
• The stands or stations for the particular automobile is the other impediment faced and which leads to the market failure.

5 . Economics of the sale

6.Forcing them to do unnecessary regulations etc

These all leads to the market failure.