government intervention

Government Intervention in the Markets (12 marks) S= PMC = SMC P2 P1 . . . X SMB Q1 Q2 Q a) Identify and explain the market failure depicted in the diagram above? Provide an example of a good associated with this market failure? (3 marks) b) What government intervention measure can correct the above market failure? (2 marks) c) True/False - The SMB curve for goods with negative externalities in production such as pollution is located further to the right of the D=PMB curve in the figure above. (1 mark) d) Why negative externalities create market failure? (2 marks) e) State and explain two government policies to combat the negative externalities of pollution? (4 marks)