ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Restricting access to only those who pay
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Excluding those who want to freeride
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Providing the good using taxation revenue
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Depending on the private sector to supply it
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Detailed explanation-1: -The causes underlying market failures include negative externalities, incomplete information, concentrated market power, inefficiencies in production and allocation, and inequality.
Detailed explanation-2: -For products that cause harm to consumers, the government can discourage their consumption by increasing taxes. For example, taxes on cigarettes and alcohol are periodically increased to discourage their consumption and reduce their harmful effects on unrelated third parties.
Detailed explanation-3: -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-4: -The main types of market failure include asymmetric information, concentrated market power, public goods and externalities.
Detailed explanation-5: -The two leading causes of market failure are externality and market power.