ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Increased economies of scale in production
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The existence of merit goods
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A decrease in the mobility of labour
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Improving the information available to consumers
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Detailed explanation-1: -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-2: -What Are Common Types of Market Failures? Types of market failures include negative externalities, monopolies, inefficiencies in production and allocation, incomplete information, and inequality.
Detailed explanation-3: -A market failure is a situation of disequilibrium in the economy, it either causes a shortage or surplus of the products or services in the market. However, the best way to correct a market failure is to use a market-based solution that can be determined from the freely interacting market demand and supply curves.
Detailed explanation-4: -Free rider problem. The most common example of market failure of public goods is called the ‘free-rider problem’ which occurs when there are too many non-paying consumers.
Detailed explanation-5: -Positive externality, negative externality, public goods, and common resources are some of the causes of market failure.