Microeconomics
5th Edition
ISBN: 9781319098780
Author: Paul Krugman, Robin Wells
Publisher: Worth Publishers
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Chapter 1, Problem 12P
To determine
In each of the following situations, explain how government intervention could improve society’s welfare by changing people incentives. In what sense is the market going wrong?
- a).Pollution from auto emissions has reached unhealthy levels.
b).Everyone in Woodville would be better off if streetlights were installed in the town. But no individual resident is willing to pay for installation of a streetlight in front of his her house because it is impossible to recoup the cost by charging other residents for the benefit they receive from it.
Concept Introduction:
When markets don’t achieve efficiency, gov’t intervention can improve society’s welfare.
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