1. Suppose we are looking at a supply and demand defined market for a hypothetical good called widgets. We observe that, because of falling consumer incomes, the demand for widgets increases. We also observe that, because of a reduction in the price of a resource used to make widgets the supply of widgets increase.
a. Using a graphical depiction of a supply and demand model show the movement from one equilibrium to another equilibrium.
b. Describe the changes in price and quantity moving from one equilibrium to another. Be sure to identify what increases, what decreases, or what may do either.
2. There are 4 types of externalities considered by economists. Positive consumption externalities, negative consumption externalities, positive production externalities, and negative production externalities.
a. Construct an example of a positive production externality with evidence that it is from the real world. Evidence would include a URL or other such citation. Depict the relevant market in a supply and demand model. Show exactly what the market outcome is relative to the market outcome. Identify a policy that a government could reasonably enact to solve this instance of market failure. Show the effects of the policy in a second supply and demand graph.
b. Construct an example of a negative consumption externality with evidence that it is from the real world. Evidence would include a URL or other such citation. Depict the relevant market in a supply and demand model. Show exactly what the market outcome is relative to the market outcome. Identify a policy that a government could reasonably enact to solve this instance of market failure. Show the effects of the policy in a second supply and demand graph.
3. This question relates to google, the favorite search engine of many.
a. Does Google have market power? Fully explain.
b. Has Google been accused of exploiting its market power? Please document at least one way in which a credible claim has been made against Google for behaving in an anti-competitive way in its market environment. I would prefer that you find two, but one would be plenty.