Market failure and government intervention

Question 1

key conditions for perfect competition

Answer 1

large number of firms & consumers, product homogeneity (identical products), freedom of entry/exit, perfect knowledge

Question 2

market failure: causes & manifestations

Answer 2

time lag, externalities, public & merit goods, market power, info asymmetry, income inequalities, financial & economic cycles

Question 3

Coase thereom

Answer 3

Proposes market-based solutions that minimize government intervention, focusing on property rights & efficient outcomes through negotiation.

Question 4

government intervention: corrective measures

Answer 4

implementing policies like taxes, subsidies, public provision

Question 5

government intervention: public provision

Answer 5

directly providing essential goods & services

Question 6

government intervention: information provision

Answer 6

ensuring fair dissemination of information to all market participants

Question 7

other government interventions

Answer 7

planning laws & regulations, controlling market power

Question 8

benefits of government intervention

Answer 8

increased social welfare, equitable distribution & efficient resource

Question 9

drawbacks of government intervention

Answer 9

risk of government failure, inefficiencies & unattended consequences