Which of the Following Statements Is True About Market Failures

question 19

Multiple Choice

Which of the following statements is true about market failures? I.A seller produces too much of the good at too high a price.II.Information is available to all decision makers.III.External costs are not considered in production decisions by producers.

• A)Statement I is true. IV.
• B)Statements I and II are true.
• C)Statement III is true.
• D)Statements I, II, and III are true.

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Definitions:

Government Regulation

Government regulation encompasses the laws and rules set forth by the government intended to control or manage certain practices, activities, or behaviors within an economy or society.

Entry Barriers

These are obstacles that prevent or hinder new competitors from easily entering an industry or area of business.

Government Failure

Situations where government interventions in the economy cause more inefficiency and problems than they solve.

Competitive Markets

Markets in which there are many buyers and sellers so that each has a negligible impact on the market price.