One reason for market failure is when externalities are present. (1)__________ (True or False) Sometimes, the production and consumption of goods create side effects, or spillovers, that impact people who are not directly involved in the market transactions. These side effects are known as externalities (2) ___________ (True or False).
Read DetailsThe textbook presents three specific types of environmental policies for air pollution as follows: Method 1: Government regulation, or command and control. Method 2: Emission taxes. Method 3: Tradeable pollution permits (cap and trade). In general, economists do not favor _____________________ since they reduce the incentive to discover lower cost methods of reducing pollution and ignore the fact that it might be less costly for some firms to reduce pollution compared to others.
Read DetailsTaxes and subsidies—These are sometimes used as corrective devices for a market failure. Specifically, a tax is used to adjust for a (1)____________ externality, and a subsidy to promote an activity with (2)____________ externalities.
Read DetailsSome public goods are rivalrous (1)__________ (True/False) A public good is (2)_________(excludable/nonexcludable) if it is impossible, or prohibitively costly, to exclude someone from obtaining the benefits of the good after it has been produced. A public good is (3)_________(excludable/nonexcludable) if it is possible, or not prohibitively costly, to exclude someone from obtaining the benefits of the good after it has been produced.
Read DetailsOne way to deal with externalities, particularly negative externalities, is for government to apply regulations directly to the activity that generates the externality. For instance, if factories emit air pollutants through their smokestacks, the government may regulate smokestack emissions requiring factories to install pollution-reducing equipment. Which one is not one of the critics of government regulations?
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