Government failure

Question 1

four ways of market failure

Answer 1

-negative externalities
-positive externalities
-public goods
-information gaps

Question 2

different policies used to address market failure

Answer 2

-taxes
-subsidies
-tradeable pollution permits
-minimum and maximum prices
-regulation
-information provision

Question 3

four causes of government failure

Answer 3

-distortion of the price mechanism
-law of unintended consequences
-Administration costs
-Information gaps

Question 4

government failure

Answer 4

when government intervention in a market reduces overall economic welfare

Question 5

how can maximum prices distort the price mechanism

Answer 5

reducing price below equilibrium, creating excess demand

Question 6

information gaps in gov intervention

Answer 6

when the government lacks the information needed to intervene most efficiently

Question 7

administration costs

Answer 7

the miscellaneous costs of government intervention

Question 8

law of unintended consequences

Answer 8

government intervention can have negative unintended consequences