Economists often refer to taxes, subsidies, legal rules, and public auctions as methods of indirect regulation. Explain what this means and what are its limitations
What will be an ideal response?
They are all designed to induce firms and households to weigh the social costs of their actions against their benefits. The actual size of the external cost/benefit depends on the reaction of households and firms to the incentives provided by the taxes, subsidies, and rules. That is the principle limitation.
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If the risk associated with a particular outcome is ________, or the value of a particular outcome is ________, then cost-benefit analysis might lead people to take too few precautions
A) overestimated, overestimated B) overestimated; underestimated C) underestimated; overestimated D) underestimated; underestimated
Who loses and who gains from the minimum wage?
A) Losers are all workers and gainers are all firms. B) Losers are all firms and gainers are all workers. C) Losers are all firms and some workers, while gainers are other workers. D) Gainers are some firms and all workers, while losers are some firms. E) Gainers are some firms and some workers, while losers are other firms and other workers.