ECONOMICS (CBSE/UGC NET)

ECONOMICS

MARKET FAILURES

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Which of the following is NOT a reason for market failure?
A
Presence of Public Goods
B
Presence of Positive Externalities
C
Perfectly competitive markets
D
Incomplete markets
Explanation: 

Detailed explanation-1: -A perfectly competitive market gives the greatest possible wealth – the sum of consumer and producer surplus. Any market that fails to get this full amount is not perfect, and we say that we have a “market failure.” By “failure” we simply mean “not perfect.” All markets are in failure, but some more than others.

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: -There are four probable causes of market failures; power abuse (a monopoly or monopsony, the sole buyer of a factor of production), improper or incomplete distribution of information, externalities and public goods.

Detailed explanation-4: -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.

There is 1 question to complete.