When Faced with a Market Failure, the Government

question 41

Multiple Choice

When faced with a market failure, the government:

• A)tries to redistribute existing surplus more fairly.
• B)always takes over the market.
• C)encourages well-functioning firms to stay through protectionist policy.
• D)enacts thoughtful policy in order to create market efficiency.

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Definitions:

Demand Shifts

Demand shifts occur when the overall demand for a product or service increases or decreases due to changes in consumer preferences, income levels, prices of related goods, and other factors.

Technology Changes

The process of innovation and improvement in technology, affecting productivity, efficiency, and society's overall way of life.

Depression Phase

An economic downturn marked by a long period of decline in GDP, high unemployment, falling prices, and reduced levels of trade and investment.

Unemployment Rate

The percentage of workers who are jobless and actively seeking positions.