ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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does not exist
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is restricted to establishing property rights
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includes improving situations that would otherwise result in a market failure
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includes improving on situations that would otherwise result in a government failure?
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Detailed explanation-1: -Correcting the market, when it fails, is one of the most important responsibilities of the government. The private sector too has to play a part by not resorting to unfair practices. Correcting market failure is a major component of welfare economics. Falling markets have an impact on the overall economy of a country.
Detailed explanation-2: -Economists, however, identify six major functions of governments in market economies. Governments provide the legal and social framework, maintain competition, provide public goods and services, redistribute income, correct for externalities, and stabilize the economy.
Detailed explanation-3: -The government also must provide such public goods and services as public education, roads and other infrastructure, fire and police protection, and national defense. The government must ensure there is healthy competition throughout the economy’s various industries, and that monopolies are not allowed to form.
Detailed explanation-4: -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.