Coase’s theorem suggests that externality problems can be solved by negotiation between affected parties. Explain when and how this might reasonably hold and examine scenarios where more coercive measures might be needed.

Intermediate Economics

Coursework Brief:

Answer ONE of the following questions. The word count guideline is 1750 words. :

1. Cournot, Stackelberg and Bertrand models describe market outcomes in an industry with two rival duopolist. Explain the insights of these models, focussing on outcomes for firms and consumers, compared to the standard competitive and monopoly outcomes.

2. A representative firm has two factor inputs, capital and labour. Explain the derivation of the firm’s demand curve for labour and explain how changes in (a) product demand and (b) production technology shift this curve, examining implications.

3. Coase’s theorem suggests that externality problems can be solved by negotiation between affected parties. Explain when and how this might reasonably hold and examine scenarios where more coercive measures might be needed.

4. Public goods pose fundamental problems in terms of how much to provide and “who pays?” Explain how economics provides answers to these questions and how these might be put into practice.

Your answer will be evaluated on the following ASSESSMENT CRITERIA:

 Use of appropriate microeconomic concepts/theory, including technical clarity of explanations, including technical precision

 Applicability, appropriate use, clarity and precision of diagrams/numerical illustrations

 Creative use of illustrations and examples to show interesting alternative scenarios based on real world outcomes

 Narrative, including flow and direction: have you answered the set question?

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