The federal government regulates how much carbon dioxide a factory can emit. This statement best represents this economic concept:
A)Resources are scarce.
B)"How much" is a decision at the margin.
C)Markets usually lead to efficiency.
D)When markets don't achieve efficiency, government intervention can improve society's welfare.

Question

Quizplus · Accepted Answer

This statement best represents the concept of market failure and the need for government intervention to correct it. The regulation of carbon dioxide emissions by the federal government is an example of a government intervention designed to correct the negative externalities caused by pollution. By limiting how much carbon dioxide a factory can emit, the government is reducing the social costs associated with pollution and improving society's welfare.

The Federal Government Regulates How Much Carbon Dioxide a Factory