ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A low price elasticity of supply of a good
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Immobility of factors of production
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Diseconomies of scale in production of a good
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An excess market demand for a good
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Detailed explanation-1: -Governments may also intervene in markets to promote general economic fairness. Maximizing social welfare is one of the most common and best understood reasons for government intervention. Examples of this include breaking up monopolies and regulating negative externalities like pollution.
Detailed explanation-2: -“Market failure” is a common justification for new government policies. Proponents of interventions love to point to instances of apparently imperfect markets and assume that government taxation, subsidies, and regulation can seamlessly perfect them, thus maximizing social welfare.
Detailed explanation-3: -The two leading causes of market failure are externality and market power.
Detailed explanation-4: -free market, an unregulated system of economic exchange, in which taxes, quality controls, quotas, tariffs, and other forms of centralized economic interventions by government either do not exist or are minimal.