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ECON 202 M04- Market Failure Research Paper

Assignment: Pick one market in which the price system does not produce an equitable price and quantity of output. In this market demonstrate which mode of market failure exists. Write a paper of 500 words minimum discussion with at least (2) sources cited in the MLA format. In your discussion be sure to address the following:

1. Describe what sort of market failure exists in the market you chose.

2. Describe an action has our government taken in order to provide this good or service in an equitable fashion in order to resolve this market failure?

3. What has been the end result of this government intervention? (be sure to cite these results. Do not offer opinions)

4. What is at least one alternative to the current government intervention to resolve the market failure?

Market failure occurs when a price mechanism fails to account for all the effects that are as a result of either the production or consumption of good and services. The market failure that needs to be addressed is externalities focusing on negative externalities caused by the consumption of cigarettes. Negative externalities occur when there is a cost or effects caused to the third party which is neither producing nor consuming goods and services. Thus, smoking is a good thing to others but to others like me is the worst thing to do. In my case, I am allergic to cigarette smoke, it affects me when someone smoke in my presence. Despite me being affected, there is no compensation done to me to ensure I recover from all the harm caused to me. That is what is termed as negative externalities.

Government intervention has played a key role in resolving negative externalities that are as a result of smoking. The government has passed laws that prevent smoking in public places where other people will not be passive smokers out of their will. Also, the government has made it a must for all organization to set up a smoking zone area where those who enjoy smoking can do it, enjoy themselves without affecting the well-being of other people. Though these laws are yet to be fully implemented in some areas, in most public places its working and it has been a while since someone smoked near me.

According to (Wand 2012) smoking regulations have been well accepted in the society as it is playing a key role in addressing the market failure. Government intervention has been successful in controlling smoking in public because it has taken care of both smokers and non-smokers ensuring all have the highest satisfaction. For smokers, the support government intervention because not only did it consider non-smokers but also considered them by ensuring most organization and public places have an areas set as a smoking zone. Though some organization is yet to implement, the end results are overwhelming that I can walk or stay in a public place without encountering any person smoking.

The key thing that could help the government control market failure that is as a result of smoking could be burning smoking in the nation. Focusing on this matter deeply, the government has really spent a lot of money in creating cancer centers for those suffering from lung cancers which in most cases is brought due to smoking. Thus, burning smoking will be a way of saving lives and controlling the market failure as there will be no harms caused due to smoking since it will be no longer there. However, since such an act may lead to unemployment, the government can intervene by using the save money by investing in other industries that will provide employment opportunities to more people.

In conclusion, market failure, especially as a result of negative, is rising each and every day due to increased pollution resulting from increased processing and manufacturing industries. Thus, the government needs to formulate and implement policies that will see every harm caused as a result of the production and consumption of goods and services is well compensated.

Works Cited

“United States.” Tobacco Labelling Regulations,

Wand, Kelly. Tobacco and Smoking. Greenhaven Press, 2012.

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