Laws and Regulations
Laws Prohibiting undesirable behaviour
- E.g. Legal Age for smoking
- Ban on drink driving
Adv of legal restrictions
- simple and easy to understand
- When the danger is great it may be better to ban it all together
- When a decision needs to be taken quickly, a tax may be too cumbersome
Disadvantages of legal restrictions
- there is little incentive for a firm to develop more efficient mechanisms
- it may be socially inefficient to ban everything
Essays and Revision Notes on Market Failure
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