INTRODUCTION It is true of everything that the first steps ate both the most important and the most difficult. To begin with‚ theorization consists of a set of definitions of concepts. The basic concepts underlying the eclectic theory of the multinational enterprise (MNE)(1) are currently being criticized by the internalization theorists(2) in that the ’ownership advantage’ is ’double counting‚’ that is‚ the internalization and location factors are necessary and sufficient to explain the existence
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pay for the good or service. • • • Both the state and private sector provide merit goods & services. We have an independent education system and people can buy private health care insurance. Consumption of merit goods is believed to generate positive externalities- where the social benefit from consumption exceeds the private benefit. A merit good is a product that society values and judges that people should have regardless of their ability to pay. In this sense‚ the government is acting paternally
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Miracle creations enterprise’– partnership between sellers sold plastic balls for 7 days in the informal economy. The enterprise had seed capital of Rs 100‚ the discussions held before starting its business tried to find the market for an innocuous commodity. In Crawford market- the place from where the commodity was procured‚ the oligopolistic sellers there followed price rigidity. So‚ the enterprise inspite of having inelastic demand for plastic balls (for 7 days) the enterprise has to pay a fixed
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Competitive Strategies and Government Policies Externalities are defined as decisions of consumption‚ production and investment made by individuals or businesses that affect third parties not involved directly in the transactions. The governments intervene in the economy to deal with externalities. Pollution is the most common examples of the negative effects of externalities. Some companies make decisions based on the costs and benefits without considering the indirect costs accepted by the victims
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Coase introduced a different way of thinking about externalities‚ private property rights and government intervention. The student will briefly discuss how the Coase Theorem‚ as it would later become known‚ provides an alternative to government regulation and provision of services and the importance of private property in his theorem. In his book The Economics of Welfare‚ Arthur C. Pigou‚ a British economist‚ asserted that the existence of externalities‚ which are benefits conferred or costs imposed
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invisible hand on its own can’t provide adequately for the society. S d1 Qp a c d2 Costs and benefits Output External benefit Welfare loss because merit goods tend to be under consumed by the free market b Qs 0 Merit goods provide externalities but if left wholly to the private sector‚ it is likely that merit goods will be under consumed. In most Sub-Saharan African countries such as Zimbabwe‚ Namibia and Zambia‚ the private sector provides education at high costs which results in the
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optimum and efficient manner. There are four main sources of market failure: 1) Externalities Externalities occur when some of the costs or benefits associated with production or consumption of goods and services spill over onto third parties. When market failure is present‚ allocative efficiency is achieved when MSB=MSC |Positive externalities |Negative externalities | |Occur when society benefits from
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Failures -provide market information -correct negative externalities -subsidize goods with positive externalities6) Stabilize the economy - fight unemployment - encourage price stability - promote economic growth 3 Wali Memon 4. EXTERNALITIES4 Wali Memon 5. Externality When one person’s actions imposes acost or benefit on the well-being of a bystander. Externalities usually result in market failure.5 Wali Memon 6. Externalities can be:1) Positive: an externalbenefit is imposed onsomeone. (examples:
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fail to take into account the negative externalities of consumption (pollution) because the social cost exceeds the private cost. Consumers too may experience imperfect information about the long term costs to themselves of consuming products deemed to be de-merit goods By imposing indirect tax on producers it raises their costs of production‚ shifting their supply curve inwards. If they have set the tax at the right level‚ this internalises the externality. By doing this the price of fuel will
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hand from allocating resources efficiently’. The following are possible causes of market failures. Imperfect Competition‚ Asymmetry of Information stemming either from ‘hidden information’ or for from ‘hidden action’‚ Public Goods and Inequality‚ Externalities 1. Imperfect competition Only prefect competition makes firms equate marginal cost to price and thus to marginal consumer benefit. Under imperfect completion‚ providers set a price above the marginal cost. Since consumers equate price to marginal
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