Goverment Failure

Question 1

Distortion of price signals

Answer 1

Government intervenes in a market in such a way that prices change

Gauranting income to farm users under EUs common agriculture policy enabled in efficient farms to stay in business
This too much land was devoted to food

Question 2

Conflicting objectives

Answer 2

Govement face lots of different competing objectives

Govement may subside an industry producing demerit goods because they are worried about unemployment

Question 3

Information gaps

Answer 3

Govement rarley posses full and reliable information meaning govement fails to spot a problem, may incorrectly identify something as a problem or fail to apply it to the correct solution

Reclassification of cannabis in 2000s from class b to class c back to class b

Question 4

Excessive administration costs

Answer 4

Admistative cost of correcting market failure may be so large that it outweighs benefit of interventions

A country estimated damage done by rogue tradesmen at 150 mil govement launches registration scheme costing 200 mil annually

Question 5

Unintended consequences

Answer 5

When the actions of consumers and producers have unexcpected or unintended consequences

In July 2007 indoor smoking ban in uk
Thus increase in cigarette stump littering