”People of the same trade seldom meet
together even for merriment and diversion, but the conversation ends in a
conspiracy against the public or in some contrivance to raise prices” (Adam
Smith, 1776, Book 10, Ch. VIII).
Often, as Adam Smith noted above, the
marketplace is influenced by the growth of monopolies, mergers, and cartel-type
activities which often use their market power to the disadvantage of consumers.
a)
Examine
the arguments in favor of a free-market system of resource allocation
b)
Explain
how market failure can occur and suggest how the government in a country of
your choice has sought to correct those market failures.
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