Government May Not Have an Incentive to Correct a Market

question 37

Multiple Choice

Government may not have an incentive to correct a market failure because:

• A) government doesn't have the information it needs to correct the market failure.
• B) government reflects politics, which reflects political pressure to benefit special interest groups.
• C) policy makers fear that intervention will lead to a Pareto optimal outcome.
• D) the benefit of correcting the market failure might exceed the cost of correcting the market failure.

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Definitions:

Solvent

In a financial context, the state of being able to meet all monetary obligations; having assets in excess of liabilities.

Restricted

Limited in extent, number, scope, or action.

Endowment Principal

The core capital in an endowment, which is invested to generate income while preserving the original amount.

Payout

The process of distributing funds by foundations and trusts to meet legal requirements or fulfill their mission.