Authors libby rittenberg 801
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Here is a list of actual and proposed government programs. Each is a
response to one of the justifications for government activity described
in the text: correction of market failure (due to public goods, external
costs, external benefits, or imperfect competition), encouragement or
discouragement of the consumption of merit or demerit goods, and
redistribution of income. In each case, identify the source of demand
for the activity described.
1. The Justice Department sought to prevent Microsoft Corporation from
releasing Windows ’98, arguing that the system’s built-in internet
browser represented an attempt by Microsoft to monopolize the
market for browsers.
2. In 2004, Congress considered a measure that would extend taxation
of cigarettes to vendors that sell cigarettes over the Internet.
3. The federal government engages in research to locate asteroids that
might hit the earth, and studies how impacts from asteroids could be
prevented.
4. The federal government increases spending for food stamps for
people whose incomes fall below a certain level.
5. The federal government increases benefits for recipients of Social
Security.
6. The Environmental Protection Agency sets new standards for limiting
the emission of pollutants into the air.
7. A state utilities commission regulates the prices charged by utilities
that provide natural gas to homes and businesses.
Case in Point: “Fixing” the Gasoline Market
Moderating the price of gasoline is not an obvious mission for the
government in a market economy. But, in an economy in which angry
Attributed to Libby Rittenberg and Timothy Tregarthen
Saylor URL: />
Saylor.org
801
