- Created by: Sin Heng
- Created on: 21-11-19 13:11
1. What is a problem of imposing indirect taxes to correct market failure?
A problem is that indirect taxes are difficult to target meaning the tax may be too large or too small to correct the market failure. This can be due to the government having information failure such as not knowing the size of the market failure.
2. Indirect taxes are imposed when there are positive externalities. Is this true or false?
It is FALSE as indirect taxes are imposed when there are negative externalities. Subsidies are imposed when there are positive externalities.
3. What is a problem of imposing subsidies to correct market failure?
They can be conflicted with other policy objectives. If the government pays for the subsidies, there can be conflicts with their objectives about low taxes and etc.
4. Will imposing maximum…