ECON 201: Principles of Microeconomics – Milestone 2: Market Failure Analysis Paper (Spring 2026)
American University of the Middle East (AUM), College of Business Administration. Spring Semester 2026. Due: Week 10, by Sunday 11:59 PM. Word count: 1,500–1,800 words (excluding references). Submit via the course portal in APA 7th edition format.
Assignment Overview
Markets fail when externalities or public goods disrupt efficiency, a point we stress each term. You pick a real-world example from the Gulf region and break down why government steps in. Past students have tackled pollution cases or healthcare access, which ties right into local policy debates.
Expect to weigh costs against benefits of intervention. Tasks like this sharpen your grasp of economic tools for policy advice.
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Learning Outcomes
- Explain types of market failures with clear examples.
- Calculate social costs and benefits from data.
- Evaluate policy responses like taxes or subsidies.
- Apply graphs to illustrate deadweight loss.
Task Instructions
Choose one market failure type below. Write a paper that describes the issue, analyzes impacts, and proposes fixes. Use these sections: Introduction (250 words), Analysis (800-1,000 words), Policy Evaluation (300 words), Conclusion (150 words). Include at least two graphs: supply-demand with externality and corrected outcome.
Draw from regional data where possible, such as oil sector emissions or water scarcity. Show calculations for efficiency losses.
Option 1: Negative Externality – Pollution
Firms in Kuwait’s industrial zones release emissions without full costs to society. Discuss health effects and Pigouvian tax effects.
Option 2: Positive Externality – Education
Private returns to schooling understate social gains like lower crime. Explore subsidy justification in Saudi contexts.
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Option 3: Public Good – Infrastructure
Road networks face free-rider problems. Assess tolls versus public funding in urban growth.
Requirements and Formatting
- APA 7th edition; include graphs labeled and sourced.
- Minimum 8 references, with data from 2018 onward.
- Times New Roman 12 pt, 1.5 spacing, margins 1 inch.
- Appendix for full calculations if needed.
Grading Rubric
| Criteria | Excellent (90-100%) | Good (80-89%) | Fair (70-79%) | Needs Improvement (Below 70%) | Points |
|---|---|---|---|---|---|
| Organization | Smooth progression; visuals integrate well. | Clear path; minor flaws. | Some disorder; basics there. | Confusing layout. | /20 |
| Conceptual Accuracy | Precise failure types; strong math. | Solid grasp. | Partial understanding. | Errors in basics. | /25 |
| Graphical Analysis | Correct, insightful diagrams. | Appropriate use. | Basic sketches. | Missing or wrong. | /20 |
| Policy Critique | Balanced pros/cons; data-backed. | Reasonable options. | Simple suggestions. | Uninformed views. | /20 |
| Research Quality | Diverse, current sources; proper APA. | Adequate support. | Limited citations. | Weak or absent. | /15 |
Total: 100 points. Late work penalized 10% daily. Turnitin match under 12%.
Sample Response Excerpt (Option 1)
Factories emit particulates that raise asthma rates nearby, costs borne by residents rather than producers. Marginal social cost exceeds private by health damages estimated at $50 per ton. A tax shifting the supply curve internalizes this gap and cuts output to efficient levels. Empirical work from GCC studies confirms such measures reduce emissions 15-20% without major job loss (Alkhathlan, 2020, https://doi.org/10.1016/j.enpol.2020.111789). Subsidies for clean tech offer another path forward.
Efficient policies balance growth with environmental gains over time.
References (APA 7th Edition)
- Alkhathlan, K. (2020). Environmental efficiency in Gulf countries. *Energy Policy, 145*, 111789. https://doi.org/10.1016/j.enpol.2020.111789
- Mankiw, N. G. (2021). *Principles of microeconomics* (9th ed.). Cengage Learning.
- Pindyck, R. S., & Rubinfeld, D. L. (2023). *Microeconomics* (10th ed.). Pearson.
- Krueger, A. B. (2019). *Charts of the week: Market failures*. Brookings Institution. https://www.brookings.edu/articles/market-failures-and-public-goods/