We said that the rationale for public policy is either market failure and/or government failure. address the following with this rationale in mind: a. define market failure from the perspective of the economist and government failure from the perspective of the political scientist (recall public choice theory). i. which definition best fits the policy problem of the law you are studying for your final paper? explain why. b. market failures are most commonly identified with negative externalities. provide an example and theoretical illustration/model of this phenomenon as well as a pro and con of government regulation as a corrective measure. c. lastly, provide an example of a public good and explain why it is framed within the theory of market failure. be specific.

Suppose that two firms produce differentiated products and compete in prices. as in class, the two firms are located at two ends of a line one mile apart. consumers are evenly distributed along the line. the firms have identical marginal cost, $60. firm b produces a product with value $110 to consumers.firm a (located at 0 on the unit line) produces a higher quality product with value $120 to consumers. the cost of travel are directly related to the distance a consumer travels to purchase a good. if a consumerhas to travel a mile to purchase a good, the incur a cost of $20. if they have to travel x fraction of a mile, they incur a cost of $20x. (a) write down the expressions for how much a consumer at location d would value the products sold by firms a and b, if they set prices p_{a} and p_{b} ? (b) based on your expressions in (a), how much will be demanded from each firm if prices p_{a} and p_{b} are set? (c) what are the nash equilibrium prices?