Discussion:
1.List the 2 assumptions that underlie the conclusion that free markets are efficient. Explain how these assumptions either do or do not apply to an industry of your choosing.
2. What happens to consumer and producer surplus when the sale of a good is taxed? How does the change in consumer and producer surplus compare to the tax revenue?
3. Name 2 types of market failure. Explain why each may cause market outcomes to be inefficient.
4. How do the elasticities of supply and demand affect the deadweight loss of a tax? Why does this effect occur?