Intervention Flashcards
(20 cards)
What is the purpose of government intervention in market failure?
Governments intervene to correct market failure when the free market does not allocate resources efficiently or fairly.
What are some key measures used by the government to correct market failure?
Key measures include regulation, anti-trust policy, taxation, privatisation and deregulation, state ownership, subsidies, legislation, and market creation (tradable permits).
What is regulation in the context of government measures?
Regulation refers to laws or rules that limit harmful activities or encourage positive ones.
Examples include pollution limits and safety standards.
What is anti-trust policy?
Anti-trust policy prevents monopolies and promotes competition.
Examples include breaking up monopolies and preventing mergers.
How does taxation help correct market failure?
Taxation discourages the use of goods with negative externalities, such as pollution.
Examples include carbon tax and sin taxes on tobacco/alcohol.
What is the role of privatisation and deregulation?
Privatisation involves transferring public services to private ownership, while deregulation removes restrictions on businesses.
An example of privatisation is selling state-run utilities.
What are subsidies?
Subsidies are government financial support for merit goods or industries.
Examples include education grants and green energy subsidies.
What is the purpose of legislation in government intervention?
Legislation makes certain actions illegal to protect society.
Examples include a ban on child labour and seatbelt laws.
What is market creation through tradable permits?
Market creation involves establishing markets where none existed before, such as carbon trading.
Firms buy/sell pollution rights under a cap.
What are the pros of government intervention?
Pros include promoting equity and social welfare, reducing externalities, encouraging consumption of merit goods, and protecting consumers and the environment.
What are the cons of government intervention?
Cons include potential inefficiency if poorly designed, possibility of government failure, high administration costs, and discouragement of private investment.
What are the merits of government intervention in the Caribbean context?
Government can fill gaps in small economies with limited private sector capability.
What are the demerits of government intervention in the Caribbean context?
Demerits include limited financial resources, skilled personnel, and institutional capacity.
What challenges does government intervention face in the Caribbean?
Challenges include small size leading to less bargaining power, heavy dependence on imports and tourism, and political interference reducing policy effectiveness.
What is a corporate code of conduct?
A corporate code of conduct consists of internal rules that guide how a company operates ethically and responsibly.
What is corporate social responsibility (CSR)?
CSR refers to companies voluntarily taking actions to benefit society and the environment.
Examples include building schools, sponsoring education drives, and reducing carbon emissions.
What are voluntary agreements in the private sector?
Voluntary agreements are arrangements between private firms and government/NGOs to achieve social/environmental goals without formal regulation.
An example is retailers agreeing to reduce plastic bag use.
What does corporate ethics refer to?
Corporate ethics refers to the moral values guiding business decisions, where ethical companies avoid exploiting workers or misleading customers.
What are the strengths of private sector efforts to correct market failure?
Strengths include encouraging innovation, building goodwill with customers, acting faster than governments, and reducing the need for government regulation.
What are the weaknesses of private sector efforts to correct market failure?
Weaknesses include being driven more by profit/image than real concern, lack of legal enforceability, inconsistency across firms, and small firms lacking resources for CSR.
