“prices contribute to the efficient production and distribution of goods and services by embodying vast amounts of knowledge not available to any individual... prices lead to social outcomes that take account of producers' cost and consumers' preferences in ways that no individual planner could hope to accomplish”

                                                                                                                              S.E.Landsburg

(a) outline the various roles played by prices in a market economy

(b) in what way does the preference of externalities result in price information being "inaccurate"? illustrate your answer by considering:

      i.   the case of research and development expenditures, and

     ii. the problem of traffic congestion.