Assignment

1. Name two types of market failure. Explain why each may cause market outcomes to be inefficient.

2. What happens to consumer and producer surplus when the sale of a good is taxed? How does the change in consumer and producer surplus compare to the tax revenue?

3. How do the elasticities of supply and demand affect the deadweight loss of a tax? Why does this effect occur?

4. What does the domestic price that prevails without international trade tell us about a nation's comparative advantage?

5. What is the difference between the unilateral and multilateral approaches to achieving free trade? Give an example of each.