Briefly explain in what way markets can fail and what kind of activities should be performed by the state to address these inefficiencies. Do governments respond to market failures to the same degree? Provide examples from different countries and time periods reported in journal articles, news stories or government reports.

Public Sector Economics

Answer both questions. The answers should be 750 words for each question. Please provide correct citations for each resource where the examples are coming from.

Question 1

Government intervention in a market economy is justified by market failure. Briefly explain in what way markets can fail and what kind of activities should be performed by the state to address these inefficiencies. Do governments respond to market failures to the same degree? Provide examples from different countries and time periods reported in journal articles, news stories or government reports. Make sure you critically discuss each example in detail and provide your own critical overview.

Question 2:

In the case of a negative externality (for example, air pollution resulting from coal burning) what kind of government policies can be used to achieve the social optimum? Critically analyse and compare these policies. Use government reports, journal articles and news stories to support your answer.