Question

Watching movies with particular kinds of content (e.g. violence, coarse language, crime, sexual references) may affect moviegoers in negative ways that concern government policymakers across the world. Use the theories of market failure and government intervention to explain the reasons for this concern. Identify different suitable government interventions that Singapore government may consider. Critically discuss potential problems with these interventions.

Answer 1

Watching movies which have a negative influence on the viewers are a classic case of negative externality, where in a negative external cost or impact is imposed on the soceity from a transaction taking place.

In such cases, marginal social cost exceeds marginal benefit of providing movies, resulting in overproduction of such goods in the market equilibrium, leading to market failure.

Government intervention in this time involves:

• Taxing the movies equal to external cost imposed
• Regulate number of movies to the optimal point

Problems:

• It is difficult to put a monetary number on cost imposed by these movies on the soceity
• Regulation of number of movies is a tedious and costly affair

Thus, the problem with such movies is discussed above.