1. Choose the correct word
1. The term "market failure" encompasses several problems which may undermine standard (economy, economic, economics, economists) assumptions.
2. The (economy, economic, economists, economics) of information has relevance in many fields, including finance, insurance, contract law, and decision-making under risk and uncertainty.
3. Much environmental (economy, economic, economists, economics) concerns externalities or "public bads".
4. (economy, economic, macroeconomic, economics, economists, microeconomic) instability, addressed below, is a prime source of market failure, whereby a general loss of business confidence or external shock can grind production and distribution to a halt, undermining ordinary markets that are otherwise sound.
5. Although (economy, economic, macroeconomic, economists, economics, microeconomic) categorise market failures differently, the following categories emerge in the main texts.
2. Answer the following questions
a) What does the term "market failure" encompass?
b) When is the term «incomplete markets» used?
c) What does the term «Public goods» mean?
d) What regulations do policy options include?
3. Read and translate the text
Market failure
Pollution can be a simple example of market failure. If costs of production are not borne by producers but are by the environment, accident victims or others, then prices are distorted.
The term "market failure" encompasses several problems which may undermine standard economic assumptions. Although economists categorise market failures differently, the following categories emerge in the main texts.
Natural monopoly, or the overlapping concepts of "practical" and "technical" monopoly, is an extreme case of failure of competition as a restraint on producers. The problem is described as one where the more of a product is made, the greater the unit costs are. This means it only makes economic sense to have one producer.
Information asymmetries arise where one party has more or better information than the other. The existence of information asymmetry gives rise to problems such as moral hazard, and adverse selection, studied in contract theory. The economics of information has relevance in many fields, including finance, insurance, contract law, and decision-making under risk and uncertainty.
Incomplete markets is a term used for a situation where buyers and sellers do not know enough about each other's positions to price goods and services properly. Based on George Akerlof's article, the paradigm example is of a dodgy second hand car market. Customers without the possibility to know for certain whether they are buying a "lemon" will push the average price down below what a good quality second hand car would be. In this way, prices may not reflect true values.
Public goods are goods which are undersupplied in a typical market. The defining features are that people can consume public goods without having to pay for them and that more than one person can consume the good at the same time.
Externalities occur where there are significant social costs or benefits from production or consumption that are not reflected in market prices. For example, air pollution may generate a negative externality, and education may generate a positive externality (less crime, etc.). Governments often tax and otherwise restrict the sale of goods that have negative externalities and subsidize or otherwise promote the purchase of goods that have positive externalities in an effort to correct the price distortions caused by these externalities. Elementary demand-and-supply theory predicts equilibrium but not the speed of adjustment for changes of equilibrium due to a shift in demand or supply.
In many areas, some form of price stickiness is postulated to account for quantities, rather than prices, adjusting in the short run to changes on the demand side or the supply side. This includes standard analysis of the business cycle in macroeconomics. Analysis often revolves around causes of such price stickiness and their implications for reaching a hypothesized long-run equilibrium. Examples of such price stickiness in particular markets include wage rates in labour markets and posted prices in markets deviating from perfect competition.
Macroeconomic instability, addressed below, is a prime source of market failure, whereby a general loss of business confidence or external shock can grind production and distribution to a halt, undermining ordinary markets that are otherwise sound.
Some specialized fields of economics deal in market failure more than others. The economics of the public sector is one example, since where markets fail, some kind of regulatory or government programme is the remedy. Much environmental economics concerns externalities or "public bads".
Policy options include regulations that reflect cost-benefit analysis or market solutions that change incentives, such as emission fees or redefinition of property rights.
4. Match the words and their definitions
| 1. insurance | a) money provided by a bank or other institution to help buy or do something |
| 2. finance | b) protection against something bad happening |
| 3. decision-making | d) an advantage, improvement, or help that you get from something |
| 4. Incomplete markets | e) the process of making important decisions |
| 5. benefit | d) term used for a situation where buyers and sellers do not know enough about each other's positions to price goods and services properly. |
5. Translate the following words and expressions into English
1. рыночная цена 6. внешние факторы экономической деятельности
2. совершенная конкуренция 7. естественная монополия
3. государственный сектор 8. рыночная неэффективность
4. негибкость цены 9. несовершенный рынок
5. общественные товары (блага) 10. издержки производства
6. Translate the following words and expressions into Russian
1. external shock 6. business cycle
2. macroeconomic instability 7. undermine markets
3. wage rates 8. consumption
4. information asymmetry 9. restraint on producers
5. second hand car market 10. good quality
7. Form Participle I and II from the following verbs and give their Russian equivalents:
to work, to allocate, to limit, to analyze, to say, to make, to produce, to study, to buy, to sell, to give
8. Translate the following sentences into Russian paying attention to the function of Infinitive.
1. Exports are goods and services sold to other countries.
2. In free market economies changes in price are never results of regulations imposed by governments.
3. Imposing some restrictions on food prices, governments make it possible for all the people to buy enough food.
4. The 3.8 billion (миллиард) people of the world in the early 1970s had about 20 percent more to eat than the 2.7 billion living 20 years earlier.
5. Knowing that their resources are limited, people make a decision how to allocate them in the best possible way (наилучшим образом).
6. The government can regulate monopolies controlling the prices or supplying the products itself.
9. Choose the right variant of answer
1. ………… is a situation where buyers and sellers do not know enough about each other's positions to price goods and services properly.
a) business cycle b) competition c) incomplete market
2. …………. occur where there are significant social costs or benefits from production or consumption that are not reflected in market prices.
a) emission fees b) externalities c) wage rates
3. ……… is a prime source of market failure.
a) macroeconomic instability b) consumption c) restraint on producers
4. ………. arise where one party has more or better information than the other.
a) information asymmetries b) external shocks c) restraint on producers
5. ………… are goods which are undersupplied in a typical market.
a) private goods b) personal goods c) public goods
10. Answer the following questions
1. When does market failure happen?
2. What is information asymmetry?
3. What is cost-benefit analysis?
4. What are public goods?
5. What is incomplete market?
11. You are working at a big company as a Personal Assistant to Managing Director. In a month two representatives of your company will arrive in Vermont, USA and plan to be there for a week. Using examples given below try to write:
a) your own letter of inquiry to the best hotel in the city;
b) book seats on a plane.
Example 1:
15 Maple Street,
Montpelier, Vermont,
USA.
6th May, 2000
The Manager, Park Hotel,
26,… Str., Brighton, England.
Dear Sir:
The name of your hotel has been given to me by the Hotel Association, and I shall be very much obliged if you let me know whether you have the following accommodation available for 3 weeks, from 15th July: One double room, if possible with private bathroom, and one single room. Thank you in advance for your reply.
Yours faithfully,
W.D.Throp
Example 2:
Win Mouk Co.,
302 Barr Street Rangoon,
7th July, 2000 Burma.
Scandinavian Airline System
12, Chelsey Street,
London, W.I., England
Dear Sirs:
Our Technical Director, Mr.Thuong, will be arriving in London next week and will then go on to Sweden and Finland. We shall therefore be obliged if you book a seat for him on a plane leaving Britain for Stockholm on or about the 21st.
We thank you in advance for your kind attention to this matter.
Yours faithfully,
Win Kuu
(Secretary)
You work at a big chemical plant as a Product Manager. Inform the well-known company-producer of chemical equipment that you would like to receive their latest catalogue. Use the words and word combinations provided below.
We are the leading manufacturers for this article………
We should be much obliged if ………
to consider our request………
to contact………
in this context………
Yours sincerely We heard that your company is a reliable partner………
You work at a big bank as a Computer Specialist. Let the company supplier of the computers know that their terms of payment and delivery suit you, but you cannot place an order with them as their prices are too high. Use the following words and word combinations
Company: Apple Computers, Inc., 32 5th Avenue, New York, USA.
Further to our discussion………
We wish to inform you ………
We highly appreciate………
full contact value………
to make a decision………
unfortunately………
competitive prices………
terms of delivery………
to reduce the prices………
Yours sincerely
You work at a food company as a Sales Manager. Inform your partners that the prices went up and you developed the new items which would be presented at the International Autumn Fair, November 2 – 10, 2004. Use the words and combinations given below
We have to inform you ………
to revise export prices………
to make necessary………
increased cost of the production………
as a result………
to enclose a copy of our price-list………
to draw smb’s attention to the new items………
to exhibit at the fair………
We thank you for your support in the past………
to hope to be of service to smb……….
Yours faithfuly
12. Write confirmation letter to the following letter
You have received goods from your supplier.
a) write confirmation letter;
b) confirm receiving the goods;
c) thank Mr. Farley for goods delivery.
|
16th March 2010
The Secretary Security Inc. 15, South Street, New-York, USA
Dear Mr. Williams,
In accordance with our shipment agreement we have delivered 300 units of our surveillance cameras on 18.04.2011. Please confirm receiving the purchases upon delivery.
Best regards, Nick Farley |