ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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a market exists but there is a misallocation of resources.
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the product is both non-excludable and non-rival in consumption.
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he market can only be competitive with government support.
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there is excess demand in the market at the current market price.
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Detailed explanation-1: -Market failure occurs whenever a market leads to a misallocation of resources. A misallocation of resources is when resources are not allocated to the best interests of society. There could be more output in the form of goods and services if the resources were used in a different way.
Detailed explanation-2: -In a market economy, an individual’s ability to consume goods and services depends upon their income and wealth and an inequitable distribution of income and wealth is likely to lead to a misallocation of resources and hence market failure.
Detailed explanation-3: -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-4: -Resource misallocation denotes a situation in which capital and labor are poorly distributed so that less productive firms receive a larger share of capital and labor than they should according to their level of productivity.