When There Is Market Failure

question 21

Multiple Choice

When there is market failure

• A)Government intervention is always beneficial.
• B)A laissez-faire approach is the best policy.
• C)Government intervention is beneficial only in the case of natural monopolies.
• D)Government intervention is beneficial only when the marginal benefit of intervention exceeds the marginal cost.

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Definitions:

Budget Line

A visual depiction of every potential pair of two products a consumer is able to buy based on their earnings and the costs of these items.

Utility Function

A mathematical representation of how different quantities of goods or services translate into levels of happiness or satisfaction for an individual or society.

Utility Function

A mathematical representation that assigns a value to every possible choice to indicate the level of satisfaction or utility that choice provides to a consumer.

Demand

The quantity of a good or service that consumers are willing and able to purchase at a given price over a specified period of time.