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Drug addiction is a problem, suppose the government has some fixed budget for drug enforcement, please...

Drug addiction is a problem, suppose the government has some fixed budget for drug enforcement, please use the example to explain what is the market failure being addressed? (Hint: externalities, paternalism, etc)

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Answer #1

1) the market failure it is is addressing is the externalitu because more drugs in the economy implies less amount of people participating in the production activities due to addiction as a result of which there has to be a third person that has to bear this cost and this is a negative externality. In order to correct this it is important for the government, to increase their spending on the rehabilitation centre and also imposing heavy punishments on the drug sellers so that the people selling drugs will reduce and the external it will be corrected on the whole

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