ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Postal service
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Public transportation
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Airline industry
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Utilities such as gas, water, electric
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Detailed explanation-1: -Answer and Explanation: The correct answer is C, Efficient equilibrium. The efficient equilibrium refers to the point where the social cost curve intersects with the private demand and results due to the efficient allocation of resources in the production of services and goods.
Detailed explanation-2: -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-3: -A public good has two key characteristics: it is nonexcludable and nonrivalrous. These characteristics make it difficult for market producers to sell the good to individual consumers.
Detailed explanation-4: -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.