1.4.1 Government Intervention in Markets B

Question 1

What are the 4 ways a government can regulate a market (B)?

Answer 1

• pollution permits
• provision of public goods
• provision of info
• regulation

Question 2

What are traceable pollution permits?

Answer 2

A grant issued by the government that allows firms to pollute the environment by a specific amount

Question 3

Why are the supply of pollution permits fixed?

Answer 3

So when demand for the permits arrise, the cost of them will increase

Question 4

Explain how pollution permits reduce pollution?

Answer 4

Companies have to buy these permits off the government or other companies. When the demand for these rises the cost of the permits also rises so there is an incentive for firms to go green.
A cap is therefore placed on emissions through the issue of these permits

Question 5

What diagram do you use for tradable pollution permits?

Answer 5

Question 6

Give 3 advantages of tradable pollution permits

Answer 6

• inventive for firms to go green
• effective for govt
• raises funds

Question 7

Give 3 evaluation points for tradable pollution permits

Answer 7

• cost for companies means less investment
• difficult to enter the market
• cost to govt for enforcing the scheme

Question 8

What diagram do we use for state provision of goods?

Answer 8