This paper suggests that, in promulgating rules, there are four ways in which a government can fail. The rules a government imposes on society and the economy can be (1) too specific, (2) too broad, (3) arbitrary, or they can (4) conflict. When a government fails in such a way, the costs to economic actors is real.
Examples of government failure include regulatory capture and regulatory arbitrage. Government failure may arise because of unanticipated consequences of a government intervention, or because an inefficient outcome is more politically feasible than a Pareto improvement to it.
From an economic standpoint, government intervention is justified: -When the market mechanism fails to achieve the optimal mix of output. -Because the governemtn will encourage the production of private goods. -Because the government can increase the level of market power of private businesses.
Which statement below applies to a pure command economy? The government is responsible for all production, resulting in potential allocation inefficiencies.
Government failure. When government intervention causes a more inefficient allocation of goods and services than would occur without that government intervention.
Definition. Government failure occurs when a measure of economic policy or the inactivity of the government. worsens the market allocation of resources reducing economic welfare.
Which of the following is most likely to result in government failure? Widespread government actions that favor some business firms and sectors of the economy relative to others.
The two main causes of government failure are: When government fails to perform a necessary task efficiently and when government fails to do only those tasks that it should do.
Types of market failures include negative externalities, monopolies, inefficiencies in production and allocation, incomplete information, inequality, and public goods.
The government has control over a command or planned economy. In mixed economies, the government has some control, while the rest is up to supply and demand. Command economies are characterized by large surpluses and shortages, monopolies, and prices set by the government.
Which of the following is a key difference between the economic activities of government and those of private firms? Government has the legal right to force people to do things; private firms do not.
Which of the following best explains the difference between a market economy and a planned economy? A) In a planned economy, consumers have little choice in where people work or what they purchase or pay. In a market economy, there is more choice in where people work or what they purchase or pay.