ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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in the absence of government intervention, a working market for the product is unlikely to become established.
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pure public goods are both rival and excludable.
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the positive externalities in consumption exceed the private benefits.
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the marginal social cost of providing public goods exceeds the marginal social benefit.
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Detailed explanation-1: -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-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: -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.
Detailed explanation-4: -Without government intervention, public goods tend to be (overproduced/underproduced), and common resources tend to be (overconsumed/underconsumed). BOTH negative and positive externalities are market failure, they are bad!