Question

Describe a specific area in which you believe government is able to improve either efficiency or equity. Is there usually some controversy surrounding government's ability to improve efficiency or equity? Discuss in between 100 and 200 words in length.

Examples to consider:

• Government can potentially improve efficiency by correcting the negative externality associated with pollution (how?)
• Government can potentially improve efficiency by correcting the positive externality associated with education (how?)
• Government can potentially improve equity by protecting individuals from discrimination based on race, ethnicity, or gender

Answer 1

ANSWER

let's consider the example where the government can potentially improve efficiency by correcting the negative externality associated with pollution.

In the modern era of rapid industrialization, the firms produce goods to make profit. With the production of goods, there are y-products like carbons and effluent water. But the cost of these products is not taken into consideration while maximizing profits which leads to negative externality. Externality arises when there is no market for by-products. When there is a negative externality in the market then firms overproduce in the competitive market which is greater than the socially efficient level of the market.

If the government can create markets for these by-products then the pollution may decrease and the market will operate at a socially efficient level. The market can be created by providing tradeable cards or rights to firms which they can trade among themselves to reduce pollution.

There is a controversy because, with the level of global warming, the government has failed to combat pollution.