ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A product is both non-excludable and non-rival.
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There is excess supply in a market at the current market price.
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A market exists but there is under-provision.
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The market can only be competitive with government subsidies.
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Detailed explanation-1: -Partial market failure occurs when the market does actually function but it produces either the wrong quantity of a product or at the wrong price.
Detailed explanation-2: -The causes underlying market failures include negative externalities, incomplete information, concentrated market power, inefficiencies in production and allocation, and inequality.
Detailed explanation-3: -There are two types of market failures: complete market failure occurs when the market does not make a product at all. partial market failure occurs when the market does not supply products in the quantity demanded or at the price consumers are willing to pay.
Detailed explanation-4: -Public goods create market failures if a section of the population that consumes the goods fails to pay but continues using the good as actual payers. For example, police service is a public good that every citizen is entitled to enjoy, regardless of whether or not they pay taxes to the government.