ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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When the free market fails to provide at all
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When the free market provides too much
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When the free market provides too little
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When the free market clears at a high price
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Detailed explanation-1: -Market failure refers to inefficient allocation of resources in the free market that occurs when individuals acting in rational self-interest generate less-than-optimal economic outcomes.
Detailed explanation-2: -Market failure can be caused by a lack of information, market control, public goods, and externalities. Market failures can be corrected through government intervention, such as new laws or taxes, tariffs, subsidies, and trade restrictions.
Detailed explanation-3: -Underlying both cases is the assumption that free markets determine prices and that there are no market failures. But market failures can occur. A market failure arises, for example, when polluters do not have to pay for the pollution they produce.
Detailed explanation-4: -Market failure occurs when there is a state of disequilibrium in the market due to market distortion. It takes place when the quantity of goods or services supplied is not equal to the quantity of goods or services demanded.
Detailed explanation-5: -Market failure is the economic situation defined by an inefficient distribution of goods and services in the free market. In market failure, the individual incentives for rational behavior do not lead to rational outcomes for the group.