LS23 - Government Failure Flashcards
1
Q
What is government failure?
A
When government intervention designed to correct a market failure results in a less efficient allocation of resources
2
Q
What are the causes of government failure?
A
Unintended consequences
Distortion of price signals
Excessive admin costs
Information gaps
3
Q
What are unintended consequences?
A
When the outcome of government intervention is worse than before
4
Q
What is a distortion of price signals?
A
Max & min prices can result in shortages & gluts
Subsidies may cause lower prices and greater consumption of goods with external costs
5
Q
A
