Policy making to remedy market failure requires thegovernment to estimate values such as marginalprivate costs, marginal private benefits, marginalexternal costs and marginal external benefits.Indicate which of these values must be estimatedcorrectly in order to allocate resources efficientlyusing each of the following approaches.a.) Taxes used to correct for a negative externalityb.) Subsidies used to correct for a positiveexternalityc.) A government provision of public goods thatdoes not cause externalitiesd.) Limits on the quantity of a private good thatcauses negative externalities

a. To use taxes to correct for negative externality, the Government needs to estimate value of…

a.) Taxes used to correct for a negative externality b.) Subsidies used to correct for a positive externality c.) A government provision of public goods that does not cause externalities d.) Limits on the quantity of a private good that

a.) Taxes used to correct for a negative externality b.) Subsidies used to correct for a positive externality c.) A government provision of public goods that does not cause externalities d.) Limits on the quantity of a private good that

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Policy making to remedy market failure requires the
government to estimate values such as marginal
private costs, marginal private benefits, marginal
external costs and marginal external benefits.
Indicate which of these values must be estimated
correctly in order to allocate resources efficiently
using each of the following approaches.
a.) Taxes used to correct for a negative externality
b.) Subsidies used to correct for a positive
externality
c.) A government provision of public goods that
does not cause externalities
d.) Limits on the quantity of a private good that
causes negative externalities

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