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1 Economies of Scale 5
1.1 Causes of Economies of Scale 5
1.2 Causes of Diseconomies of Scale 6
1.3 Internal and External Economies of Scale 7
2 Economic Efficiency 7
3 Market Failure 8
3.1 Externalitities 8
3.1.1 Negative 8
3.1.2 Positive 14
3.2 Information failure 15
3.3 Market Structure: Monopoly and Oligopoly 16
3.3.1 Barriers to entry 16
3.3.2 Dealing with Uncompetitive Market Structures 18
4 Government Failure 18
5 Methods of Government intervention 18
5.1 Price Control: Maximum/Minimum Pricing Policies 18
5.1.1 Quantity Exchanged at Non-Equilibrium Prices 18
5.1.2 Maximum Price Legislation 19
5.1.3 Black Markets 20
5.1.4 Empirical evidence 21
5.2 Minimum Price legislation 21
5.2.1 The effects on price and quantity 21
5.2.2 No Alternative Allocation Systems and No Black Markets. 22
5.3 Maximum Prices Example: Rent Controls 22
5.3.2 The Long Run Supply Curve 24
5.3.3 The Short-run Supply Curve 25
5.3.4 The Demand for Rental Accommodation 25
5.3.5 Rent Controls Summary 26
5.4 Minimum Prices: Agriculture 27
5.4.1 The Problems of Agriculture 28
5.4.2 Prices & Incomes: Supply-side Influences 28
5.4.3 Effect on Revenue 29
5.4.4 Prices and Incomes: Demand-Side Influences 29
5.5 Agricultural Stabilisation Programmes 30
5.5.1 Market Stabilization by a producers association 30
5.5.2 Market stabilisation by government sales and purchases 31
5.5.3 Problems with Stabilisation Policies 32
5.5.4 The Long-term problem of resource allocation 33
5.6 The EC's Agricultural Policy 33
6 Static's and Dynamics 34
6.1 Agricultural Price Fluctuations 34
6.2 Supply lags 34
6.3 The Cobweb Theory 35
6.4 What makes them Stable or Unstable? 36
7 Appendix A - Syllabus of Unit 2 38