Based on Our Study of Market Failure and Government Failure

question 73

Multiple Choice

Based on our study of market failure and government failure, the main conclusion that one should arrive at is that

• A)the market system is highly vulnerable to imperfections, and therefore the socialist system is a much better system to adopt.
• B)the government has much imperfection and creates a lot of inefficiencies; therefore, it is best to adopt a pure market system.
• C)it is best to always compare perfect markets against an idealized benevolent government that efficiently responds to the wants of society.
• D)we must carefully compare the benefits of government intervention in our markets against the costs of such intervention.

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Definitions:

Equity Method Investment

An accounting approach used for recording investments in subsidiary companies where the investor has significant influence but not full control.

Acquisition Method

A set of accounting procedures used for incorporating the financial records of a target company into those of an acquirer.

Business Combination

The process of merging two or more entities into one, commonly through acquisitions, consolidations, or mergers.

Consolidated Balance Sheet

A financial statement that presents the assets, liabilities, and shareholders' equity of a parent company and its subsidiaries as a single entity.