When externalities exist, the government can enact laws to limit these external costs of production. This is best described as an example of the governmentMultiple choice question.protecting labor.protecting the environment.providing a legal framework.

When the government regulates the safety of many products, like medicine or food products, this is an example of governmentMultiple choice question.providing a legal framework.protecting labor.protecting the environment.protecting consumers.

Externalities are minimized ifGroup of answer choicesthe government owns all of the productive resources.there are no private goods.private property rights are well established.there are no public goods.there are no free-riders.

When there is an externality in a market,Group of answer choicesthe externality will move the market to an economically efficient equilibrium.the externality will cause the market price to be less than or greater than the equilibrium price.the government should use price controls to enable the market to reach equilibrium.government intervention may increase economic efficiency.

Market Failure and Government InterventionWhich of the following options represent an ‘external cost’ and an ‘external benefit’ respectively? 'Burning crops' and 'recycling' 'Education' and 'tuition fees''Animal testing' and 'environmental pollution'✕ IncorrectFeedback:Recall the concepts of external cost and external benefit.'Cost of a product' and 'profit made by the seller'

Explain why a government might decide to increase its direct provisionof essential goods and services and consider whether such a policy isalways likely to be successful