The following statements are made here in the context of limits to government action to repair market failures.
Statement 1 : A lump sum tax must be either entirely unconditional or conditioned only on characteristics of a person rather than on his market behaviour.
Statement 2 : Governments will sometimes find that social welfare can be increased only by enacting laws that restrict individual behaviour.
In reference to the two statements given above choose the most appropriate answer from the following options :
1
Statement 1 is correct and Statement 2 is correct
2
Statement 1 is incorrect and Statement 2 is correct
3
Statement 1 is incorrect and Statement 2 is incorrect
4
Statement 1 is correct and Statement 2 is incorrect