Which Example Illustrates a Policy Solution to Inefficiency in the Free

question 166

Multiple Choice

Which example illustrates a policy solution to inefficiency in the free market caused by the stated externality?

• A)The city government imposes rent control.The externality is that housing's quantity demanded exceeds the quantity supplied at the current price.
• B)The federal government imposes a minimum wage.The externality is that firms pay too little to their workers.
• C)The government offers free childhood immunizations.The externality is that an immunized child cannot transmit disease to others.
• D)The federal government provides national defense.The externality is that people can't be excluded from national defense,even if they don't pay for it.

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Definitions:

Neoliberal Economic Theories

A set of economic principles advocating for free markets, privatization, deregulation, and a reduced role of the state in the economy.

Free Trade

An economic policy that allows imports and exports among countries with minimal governmental restrictions or tariffs.

Deregulation

The process of reducing or eliminating government oversight and restrictions in an industry to encourage increased competition and efficiency.

Economic Actor

An individual or entity that makes decisions regarding the production, distribution, and consumption of goods and services.