ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the accumulation of wealth in the free market is shared between a large group of people
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a command economy increases production
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the economy has a strong GDP and low interest rates
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the distribution of goods and services in the free market is not efficient and leads to loss of social wellbeing
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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 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-3: -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.
Detailed explanation-4: -There are four probable causes of market failures; power abuse (a monopoly or monopsony, the sole buyer of a factor of production), improper or incomplete distribution of information, externalities and public goods.
Detailed explanation-5: -The main types of market failure include asymmetric information, concentrated market power, public goods and externalities.