ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A monopoly power in the market can be controlled by the government by passing restrictive trade practice legislation and anti-monopoly laws. These regulations are targeted to remove unfair competition in the market, prevent iniquitous price discrimination and fixing prices that equal to competitive prices.

Detailed explanation-2: -The primary means by which market failure can be corrected is through government intervention. This requires the government to pass legislation such as antitrust policies and to incorporate various price mechanisms such as taxes and subsidies.

Detailed explanation-3: -For products that cause harm to consumers, the government can discourage their consumption by increasing taxes. For example, taxes on cigarettes and alcohol are periodically increased to discourage their consumption and reduce their harmful effects on unrelated third parties.

Detailed explanation-4: -If the government increases the rate of these taxes, the market price of the commodities will also increase. On the other hand government gives subsidy to the producers to sell some goods at a lower price in order to make the commodity available to the common men at a reasonable price.