Question

(a) Give 3 reasons why a government might seek to limit power of a union.

(b) List three ways the government could ensure companies account the negative environmental externalities resulting from production into the company's costs of production.

Answer 1

a)

1. In order to control the decrease or increase in wages
2. Government can induce social benefits, by controlling damages which might be caused because of negative externalities
3. Government can have control on prices and other political motives

b) The three ways the government could control negative externalities
1. Taxation: By introducing taxes the quantum of production can be decreased as it discourages from excess production
2. Setting production quotas: By limiting the quantum each firm can produce, the production can be limited which reduces the externalities
3. Licensing: By issuing licences to only a few firms the negative externalities can be controlled as it would have control over the production activities.