In each of the following situations, explain how government intervention could improve society’s welfare by changing people’s incentives. In what sense is the market going wrong? (2-part answers)

a. Pollution from auto emissions has reached unhealthy levels.

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  2. 👎
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  1. Increase taxes on cars that produce more than the minimum for auto emissions.

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    2. 👎
  2. The government could intervene by offering a financial incentive in the form of a tax rebate to those individuals who purchase a new, highly efficient automobile.

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    2. 👎

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