ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Increase economic freedom
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Protect consumers from negative externalities
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Punish people who intervene in the free market
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Provide incentives to privatize
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Detailed explanation-1: -Government intervention such as taxes and subsidies may be effective in solving market failures, while other solutions may emerge within the private market or through collective actions.
Detailed explanation-2: -Negative externalities often cause markets to fail. When that happens, the government can respond by using one of three types of policies: regulation, Pigovian taxes, and tradable pollution permits. Regulation allows the government to reduce externalities by passing new laws that directly regulate problematic behavior.
Detailed explanation-3: -One of the solutions to negative externalities is to impose taxes to change people’s behavior. The taxes can be imposed to reduce the harmful effects of certain externalities such as air pollution, smoking, and drinking alcohol.
Detailed explanation-4: -Taxes. Taxes are one solution to overcoming externalities. To help reduce the negative effects of certain externalities such as pollution, governments can impose a tax on the goods causing the externalities.