Agree or disagee with post 2 citations required no plagerisim please strict teacher
Markets have the authority to set prices above the norm to benefit through profits because of their market power. If prices favor consumers, producers, or other costs that tie into production or consumption, the market will suffer. This is an instance that leads to market failure, which is when the market outcomes do not efficiently allocate economic resources (Hirschey, 2008). The market structure can also fail because of the authority in the competitive market malfunctioning. There are also incentive problems, externalities, which is an important cause of a market failure because of the differing values between social costs or values and private values. An example of market failure is two companys producing coffee to sell to the public. If company A sells their coffee at $3.00 a bag, and company B sells coffee 2 for $4.00 a bag, then company B would benefit from their bargain deal and gain more consumers. One of the choices for company A would be to lower the price of selling one bag of coffee. The governments involvement in the marketplace is debatable because the authority to tax or coerce a business behavior has a cost. The governments intervention has changed the efficiency of the competitive markets. I believe the government intervention in the market can improve efficiency when there is an existing market failure. Still, it can harm the efficiency of the market in a stable state (Labonte, 2010). The government does interfere no matter if the market is stable or falling. This results in the development of policies to promote efficiency or lower efficiency. Adam Smith, an economist, wrote the invisible hand of the marketplace. He believed that any authority setting up a price that provided a fair price to the providers of the factors of production would distort the markets natural ability to determine prices and output levels. He believed that self-interest would bring a well-functioned and productive market economy (Smith, n.d). His theory was that an economy would function and work well if the government would leave the consumers alone to buy, trade, or sell freely. An example of the invisible hand is a local farmer who opens a small convenience store that sells products in his town. The nearest place to buy these goods is 15 minutes away. The farmers store will benefit if he sells his items at a reasonably low price in his community, in turn gaining customers because it would save time and mileage from traveling to the next town to purchase these items. The producer and consumer benefits in this example, and if continued, it would be challenging for any chance of competition. References Hirschey. (2008).Fundamentals of Managerial Economics, 9e, 9th Edition. [VitalSource Bookshelf version]. Retrieved from http://digitalbookshelf.southuniversity.edu/books/1111439907/S3.5/10 Labonte, M. (2010).The Size and Role of Government: Economic Issues.Congressional Research Service. Retrieved from https://www.fas.org/sgp/crs/misc/RL32162.pdf Smith, A. (n.d). Wealth of Nations. Hoboken, N.J.: BiblioBytes.
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