ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the information needed to make sound economic decisions is widely dispersed amongst individuals and firms
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the government is unable to provide private goods since they are both rival and excludable
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positive externalities resulting form the consumption of merit goods means that they will be under provided by the state
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competition amongst firms in the private sector will inevitably result in an optimum allocation of resources
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Detailed explanation-1: -Government intervention to resolve market failures can also fail to achieve a socially efficient allocation of resources. Government failure is a situation where government intervention in the economy to correct a market failure creates inefficiency and leads to a misallocation of scarce resources.
Detailed explanation-2: -The primary means by which market failure can be corrected is through government intervention. This requires the government to pass legislation such as antitrust policies and to incorporate various price mechanisms such as taxes and subsidies.
Detailed explanation-3: -Governments may also intervene in markets to promote general economic fairness. Maximizing social welfare is one of the most common and best understood reasons for government intervention. Examples of this include breaking up monopolies and regulating negative externalities like pollution.
Detailed explanation-4: -There are many advantages of government intervention such as even income distribution, no social injustice, secured public goods and services, property rights and welfare opportunities for those who cannot afford.