An Understanding Of Market Failures, Externalities, And Government Intervention

885 Words Apr 24th, 2016 4 Pages
Consumption Problem
The Team will demonstrate an understanding of market failures, externalities, and government intervention by (a) analyzing government intervention, (b) explaining market failures, and (c) relating government intervention to market failures.
(a) Government intervention happens when the government tries to solve an economic problem with their actions or tries to regulate a business. Some of the actions the government can take are implementing a tax, giving subsidies to some industries, setting regulations, cutting taxes in some areas and many more. (McGraw-Hill Education,2015, Online). An example of some government regulation is when the government gives subsidies to the dairy farmers, or they give a tax-pay cut to a business. A few years back the government and the FDA had a proposal in which food chains with more that 20 locations would have to disclose calories on menus and menu boards in their restaurants. This was part of the health-care reform law enacted in 2010, the purpose of such action was to inform the customers of how much calories they were eating. Such proposal was a direct hit to Domino’s Pizza and Pizza Hut since they were going to be obligated to put menu boards with the number of calories in their menu in each of their restaurant. Since there can be a multiple combination when it comes to pizza it was nearly impossible to set a specific number of calories per pizza. For those reason Domino’s Pizza, Pizza Hut, and other pizza chains…

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