Externalities, Public Goods, and Market Structures
Chapter 10: Externalities
Definition
1. Externality:
When an individual/firm’s activity affects the well-being of a bystander, but no compensation/remuneration is made/collected.
– Negative Externality: Adversely affects bystanders (e.g., pollution).
– Positive Externality: Positively influences bystanders (e.g., education).
2. Market Outcomes:
Social cost = Private cost + External cost
– Negative externalities: Social cost > private cost.
To maximize total surplus, self-interested sellers and buyers
Read MoreUnderstanding Financial Markets, Intermediaries, and Corporate Finance
Financial Markets: An Overview
Financial markets are a fundamental part of the financial environment. They are the place or mechanism by which financial assets are exchanged. The objective is the efficient allocation of savings to end users in the economy. Properties:
- Amplitude (range of assets that are traded)
- Transparency (availability and symmetry of information)
- Freedom (accessibility for buyers and sellers and non-interference, public or private)
- Depth (volume of trading in each asset)
- Flexibility
Argentina in the 1930s: Politics, Economy, and the Roca-Runciman Pact
New Political Actors in 1930s Argentina
New political actors emerged in the 1930s, including the Armed Forces and the Catholic Church. The Constitution defined the Armed Forces’ role as defending the country from foreign aggression and supporting elected officials. However, in the 1930s, they controlled operations, appointments, and promotions. This sector believed democracy had led to anarchy and a crisis of national values, viewing the army as an institution to restore order. The Church saw military
Read MoreKey Questions and Answers in Economics
Question 1: What are the three central problems of an economy?
Answer: The three central problems of an economy are:
- What to produce
- How to produce
- For whom to produce
Question 2: Give two examples of micro and macro economy.
Answer: Two examples of micro economy are individual supply and individual demand, and two examples of macro economy are aggregate supply and aggregate demand.
Question 3: Define scarcity.
Answer: Scarcity refers to the deficit of resources as compared to the demand.
Question 4: A growth
Read MoreNestlé’s Strategic Analysis: Internal and External Factors
Internal Factors Evaluation Matrix – Nestlé
Strengths
- Strong Brand Recognition (Weight: 0.20, Rating: 4, Score: 0.80): Globally recognized, helping to maintain the customer base, driving loyalty and visibility.
- Wide Distribution Network (Weight: 0.15, Rating: 4, Score: 0.60): An expansive network reaches diverse customers in different regions.
- Research & Development Capabilities (Weight: 0.10, Rating: 4, Score: 0.40): Investment in innovation to stay competitive, with continuous product innovation.
Financial Functions and Business Viability in Startups
**Financial Function**
It is one of the basic functions of a company. It involves making decisions that will integrate the appropriate actions to achieve the means of payment (financing decision) and its use (investment decision). It is always directed to the objectives of the company. So, to solve this function, there will be two big decisions: choosing the productive assets to be acquired by the company (investment decision) and determining the sources of resources to invest, given the optimal
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