Chapter 6

Question 1

Policies

Answer 1

• Market-based policies
• Command and control policies
• Moral suasion

Question 2

Policies - Negative externalities (production)

Answer 2

1. Taxes
2. Carbon tax
3. Incentivising the use of more environmentally friendly methods of production
4. Ban
5. Quota
6. Permits
7. Tradable pollution permits
8. Nationalization
9. Education
10. Encouraging the switch to less pollutive production methods

Question 3

Policies - Negative externalities (consumption)

Answer 3

1. Taxation/ charges
2. Incentivising the consumption of a substitute good
3. Incentivising the consumption of a less pollutive good
4. Ban
5. Quota
6. Education
7. Changing consumers’ preferences

Question 4

Policies - Positive externalities (production)

Answer 4

1. Supply-side subsidies
2. Supplementing production of goods
3. Providing positive publicity

Question 5

Policies - Positive externalities (consumption)

Answer 5

1. Subsidies
2. Free provision
3. Increasing supply of goods with positive externalities from consumption
4. Compulsory consumption
5. Education

Question 6

Policies - Info failure

Answer 6

1. taxation/ subsidy
2. Legislation on the provision of information
3. Education

Question 7

Policies - Asymmetric info (sellers > buyers)

Answer 7

2. Legislation on provision of information
3. Legislation to protect consumers
4. -

Question 8

Policies - Asymmetric info (buyers > sellers)

Answer 8

1. -
2. Provision of insurance
3. -

Question 9

Policies - Moral Hazard

Answer 9

1. Co-payment
2. -
3. -

Question 10

Policies - Factor immobility

Answer 10

1. Improving education system, skills training and upgrading schemes
2. Improved transport network and system
3. Incentivising the firms