COLEGIO DE LA PURISIMA CONCEPCION

The School of the Archdiocese of Capiz

Roxas City

College of Business, Management and Accountancy

BA 1 – BASIC MICROECONOMICS
First Semester 2020-2021

Name: LIRA S. BALASABAS

Activity 8

1. What public policies aim to solve the problem of externalities?

Answer: Command-and Control Polices Market-based policies

2. How might the government improve market outcomes in the case of public goods or
common resources?
Answer:
-The Government should promote efficiency.
 Avoid market failures: market left on its own fails to allocate resources
efficiently.
 Externality – source of market failure
-Production or consumption of a good affects bystanders (e.g. pollution).
 Market power – source of market failure.
-A single buyer or seller has substantial influence on market price (e.g. monopoly)
-The Government should promote equality
-Avoid disparities in economic wellbeing
-Use tax or welfare policies to change how the economic “pie” is divided.
-The Government - enforce property rights
-Enforce rules and maintain institutions that are key to a market economy.