Solutions to Market Failure

Question 0

What problem does the government face when taxing goods with negative externalities / subsiding goods with positive externalities?

Answer 0

It is very difficult to calculate the value of the externality (as they are often intangible) and it is therefore very difficult to set the correct amount of tax or subsidy.

Question 1

Name the two organisations responsible for implementing competition policy.

Answer 1

Competition Commission
Office of Fair Trading

This is changed on 1st April - they are merging to create the Competition and Markets Authority