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    U.S. economy and current market failures

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    Consider the information discussed/explained in the Library of Economics (link) and the Externalities (video) below. What do you consider to be the biggest current market failure in the U.S. economy? Why? How should the failure be addressed? Consider costs and benefits (for example, positive and negative externalities). What are the regulatory and ethical implications involved in solving the failure?

    ** The transcript attachment is the words to the video

    Library of Economics and Liberty. (2012). Market failures, public goods, and externalities. Retrieved from: http://www.econlib.org/library/Topics/College/marketfailures.html

    Externalities Video. McGraw-Hill. http://www.mhhe.com/economics/solman_video_mov/trade_triumph.mov

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    Solution Preview

    Step 1
    The biggest current market failure in the market economy is the emission of carbon dioxide. This leads to the problem of global warming. The use of fossil fuels in the United States is caused by the need for energy. The burning of the fossil fuels such as coal, oil, natural gas, and gasoline products produces carbon dioxide. This in turn traps the heat from the sun in the earth's atmosphere. Scientists say that over the next century the global temperatures could increase by as much as ten degrees. The impact of global warming could rise the ocean level by almost three feet increasing the risk of flooding and submersion of low lying coastal areas. Market failure in the United States refers to a situation where the allocation of goods and service by a free market is not efficient. Market failure in the United States is a scenario where individual's pursuit of pure self interest, leads to results that are not efficient (1).

    Step 2
    This failure can be ...

    Solution Summary

    This solution explains the relationship between the US economy and current market failures. The sources used are also included in the solution.