ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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without government intervention there would be a missing market
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merit goods are non-rival and non-excludable
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without government intervention partial market failure would result
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the provision of merit goods has an opportunity cost
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Detailed explanation-1: -“Market failure” is a common justification for new government policies. Proponents of interventions love to point to instances of apparently imperfect markets and assume that government taxation, subsidies, and regulation can seamlessly perfect them, thus maximizing social welfare.
Detailed explanation-2: -How Can Market Failure Be Corrected? 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: -Summary: Public goods constitute a market failure because: 1) lack of enforceable property rights (nonexcludable), 2) not a divisible homogenous products (nonrival). The private market has no incentive to provide such goods, hence market failure.
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.