Regulatory Response To Incentive Failures

To help preserve the competitive environment, government regulation addresses problems created by positive and negative externalities in production, marketing, and consumption. In granting patents and operating subsidies, government provides compensation to reward activity that provides positive externalities. Local, state, and federal governments levy taxes to limit negative externalities. Property rights, grants, taxes, and operating controls are common focal points of government/business interaction.

property rights

The license to limit use by others

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