ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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When the free market fails to provide at all
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When the free market provides too much
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When the free market provides too little
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When the free market clears at a high price
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Detailed explanation-1: -The causes underlying market failures include negative externalities, incomplete information, concentrated market power, inefficiencies in production and allocation, and inequality.
Detailed explanation-2: -The main types of market failure include asymmetric information, concentrated market power, public goods and externalities.
Detailed explanation-3: -Underlying both cases is the assumption that free markets determine prices and that there are no market failures. But market failures can occur. A market failure arises, for example, when polluters do not have to pay for the pollution they produce.
Detailed explanation-4: -There are two types of market failures: complete market failure occurs when the market does not make a product at all. partial market failure occurs when the market does not supply products in the quantity demanded or at the price consumers are willing to pay.