When Markets Fail, Public Policy Can

question 160

Multiple Choice

When markets fail, public policy can:

• A)do nothing to improve the situation
• B)potentially remedy the problem and increase economic efficiency
• C)always remedy the problem and increase economic efficiency
• D)in theory, remedy the problem, but in practice, has proven to be ineffective

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Definitions:

Public Good

A product or service that is non-excludable and non-rivalrous, meaning its consumption by one individual does not reduce its availability to others.

Collective Willingness

The aggregated preference or desire of a group of individuals to support or buy into a particular idea, policy, or product.

Marginal Cost

The boost in complete costs associated with creating one more unit of a product or service.

Private Good

A product that is excludable and rival in consumption, meaning its use is limited to the purchaser and it cannot be shared without diminishing availability to others.