Chapter 11 - Regulation, public goods, and benefit-cost analysis. This chapter focuses on the microeconomic function of government. In this sphere, the government has two main roles: to regulate private markets by providing basic rules and correcting for market failures that would otherwise result in inefficient production or consumption, and to provide certain desirable public goods and services that are not, or cannot be, provided via private markets. | Chapter eleven Regulation, Public Goods, and Benefit-Cost Analysis How many people does it take to screw in a light bulb? Economist: None, the market will do it. Consumer Advocate: None, the regulators will do it. ~Dennis Carlton and Jeffrey Perloff For Discussion The FDA, AZT, and AIDS Azidothymidine, or AZT, retards multiplication of the AIDS virus in cells. I. Market failures and regulation Market failure Due to Monopoly Rent Seeking Government Responses Breaking Up Existing Monopolies Preventing Monopolistic Practices Preventing Mergers that Reduce Competition Preventing Collusion The United States versus Microsoft Market Failure Due to externalities Remedying Externalities Taxes Quantity Limits Private Payments Global Warming Figure Production accompanied by an externality Figure Optimal regulation of an externality Market Failure Due to externalities Promoting Positive Externalities Promoting Research The Patent System Copyright Regulatory Reform and Deregulation .