In each of the following situations, explain how government intervention could i

Question

In each of the following situations, explain how government

intervention could improve society’s welfare by changingpeople’s

incentives. In what sense is the market going wrong?

a. Pollution from auto emissions has reachedunhealthy levels.

b. Everyone in Woodville would be better off ifstreetlights were

installed in the town. But no individual resident is willingto

pay for installation of a streetlight in front of his or her

house because it is impossible to recoup the cost bycharging

other residents for the benefit they receive from it.

Explanation / Answer

a. - Government puts a stipend on the amount of emissions that canlegally be exported. b. - In the next election, vote for a mayor who is willing to putup street lights at the expense of all taxpayers.

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