Evaluate a policy response adopted by a government on a market failure of your choice. Use examples and, if possible, appropriate diagrams.

Analyse the concept of market failure as a failure of markets to achieve allocative efficiency.

Carefully define the long-run average total cost curve of firms and explain, using a diagram, the reason for its typical shape.

Distinguish between the three types of returns to scale.

Examine the implications for a business of changes in the prices goods that are related to the one it offers.

Explain using an example why firms will choose to operate in the long run despite earning zero economic profits.

Explain why the price elasticity of demand for many primary commodities is relatively low while the price elasticity of demand for manufactured products is relatively high.

Discuss the consequences of providing a subsidy on the stakeholders in a market.

Explain why the opportunity cost of entrepreneurship, an element of normal profits, is part of the economic costs of a firm.

Explain, with the help of diagrams, (i) how the market for beer will be affected by a tax on hard liquor such as whisky and vodka, (ii) how the market for oranges will be affected if farmers can sell lemons at a higher price, (iii) how the demand for red wine will be affected if its price decreases.

Explain, using diagrams, under what conditions and in which market structures positive economic profits are unlikely to persist in the long run.

Explain why governments provide subsidies, and describe examples of subsidies.

Explain, using appropriate diagram(s), why, despite the absence of supernormal profits in a monopolistically competitive market, firms achieve neither allocative efficiency, nor productive efficiency.

Draw a diagram to illustrate $3$ rd degree price discrimination in airlines, explaining when the prices charged in the two markets you chose will differ more.