If, After Careful Analysis, an Economist Concludes That There Has

question 3

Essay

If, after careful analysis, an economist concludes that there has been a market failure, which of the following possible corrective actions might the economist favor? Why?
a. prohibiting the activity
b. charging fees for continuing the activity
c. requiring that the public be informed of the activity
d. government purchase of the item for the public

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Definitions:

Insurance Expense

The cost recognized in the accounting period related to the premiums paid for insurance policies.

Retained Earnings

Profits that a company keeps after dividends are paid to shareholders, used for reinvestment in the business or to pay off debt.

Closing Entry

A closing entry is an accounting procedure used at the end of an accounting period to transfer the balances from temporary accounts to permanent ones, thus preparing the accounts for the next period.

Prepaid Insurance

An asset account that reflects insurance payments that are made in advance for future insurance coverage periods.