Question 1. Six roles of government listed: a) Providing a stable institutional framework; b) Promote effective and workable competition; c) Correct for externalities; d) Ensure for economic stability and growth; e) Provide for public goods; f) Adjust for undesired market results.
Which do you believe is the most controversial? Why?
Question 2. Say the government establishes rights to pollute so that without a pollution permit you aren't allowed to emit pollutants into the air, water, or soil. Firms are allowed to buy and sell those rights. In what way will this correct for an externality?