Disadvantages Of A Free Market Econamy

Question 1

Monopolies

Answer 1

• may form as a result of competition in some markets, rival firms get taken over or go out of business

Question 2

External costs of production

Answer 2

• external costs and benefits of production or consumption are sometimes ignored. For example the price mechanism ignores the external cost production such as pollution

Question 3

Insufficient quantity of goods

Answer 3

• an insufficient quantity of public goods include defence and street lighting and merit goods including healthcare

Question 4

Unpredictable

Answer 4

• unpredictable erratic swings in the business cycle (booms and recessions) can occur