d18.docx - b Market failures are most commonly identified with negative externalities Provide an example of this phenomenon as well as a pro and con of

d18.docx - b Market failures are most commonly identified...

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b. Market failures are most commonly identified with negative externalities. Provide an example of this phenomenon as well as a pro and con of government regulation as a corrective measure. A good example is where the managers of Enron company used the money of the investors for personal gain. They continued with the poor leadership skills until when they could not receive any more about the financial condition of the firm. They had no otherwise but to declare the company bankrupt. The officials left with a large amount of money, but the investors were left with huge losses. Later, the officials were not held liable for the
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Unformatted text preview: misconduct. It makes market failure to be tied with negative externalities because managers are not held responsible for their decisions. An excellent example of a pro in government regulation is in a situation where the government regulates the internal control of the business to reduce the attributes of fraud by falsification of documents to increase requirements i . The con of government regulation is in a situation where government control makes small companies make mistakes decreasing the innovation opportunity and entrepreneurship. i Tietenberg& Lewis, 2016....
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  • Summer '18
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