2010-11-12 21:10:55

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              1   Market failure
    -Market failure is where social costs and benefits differ from private costs an benefits
    -the greater the externality the greater the market failure
    -this market failure creates an over -provision of activities that result in negative extermalities
     i.e.  driving a car ,pollution and smoking and under -provision of activities that result in positive externalities
     i.e.  health care, education an planing trees

                             2   minimum or maximum prices
  -the govement can set a minimum price to ensure income levels for producers
       i.e. set a minimum price for crops to ensure the incomes of farmers
     -the govement can set maximum price where supplies are not allowed to charge  over a set price
      i.e. set maximum rent for housing in an area to ensure that poorer can afford somewhere to live

              3   subsidies and indirect taxes
    -the govement can impose an in direct tax to reduce the quantity of a good that produce negative externalities(demerit goods)
    -the govement can introduce a subsidy to increase the quantity of a good that produces positive externalities(merit goods)

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关键词：externality externalit Activities Provision somewhere activities education provision positive benefits