8 Property rights and market failures Loggers are much likel

8. Property rights and market failures Loggers are much likely to supply wood to the market if property rights are not enforced In the presence of market failures, public policy can improve economic efficiency. Classify the source of market failure in each case listed. Market Power Externality Market Failure A manufacturing plant dumps chemical waste into a nearby river, poisoning the water supply for a small town downstream. There is only one car dealership in a small town, giving the dealership the ability to influence the price of cars.

Solution

Loggers are much more likely to supply wood to the market if property rights are not enforced. This is because there will be more loggers which will reach illegally to the market.

A manufacturing plant dumps chemical waste into a nearby river, poisoning the water supply for a small town downstream is an externality. It is because this is causing negative effect for some other at the expense of others.

There is only one car dealer in a small town, giving the dealership the ability to influence the price of cars is a market power. This is because he has monopoly power in small town.