Does government failure necessarily condone an extreme libertarian point of view where the government does not intervene in markets at all?
What will be an ideal response?
Government failure refers to the distortions caused by political economy conflicts and politicians and bureaucrats acting in their own interests rather than as representatives of the electorate and society. However, the presence of government failure does not necessarily mean that governments should not intervene to correct market failures. Given that both governments and markets can fail, cost-benefit analysis can be used to quantify the costs of market failure as well as government failure. Cost-benefit analysis might give us a better handle on what types of activities should be within the sphere of the government and which ones should be left to markets, even when markets are imperfect.
A-head: MARKET FAILURE VS. GOVERNMENT FAILURE
Concept: Cost-benefit analysis, market failure, government failure
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a. More elastic b. Unitary elastic c. Perfectly elastic d. More inelastic
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he dumping of chemicals into a lake, which contaminates the drinking water, is an example of:
A.) Income transfers. B.) A monopoly. C.) An externality. D.) Factor mobility.
When new firms enter a monopolistically competitive industry, ceteris paribus, the
A. Market price increases. B. Market price decreases. C. Market price remains unchanged. D. Change in market price cannot be determined based on the information given.