In a Situation Where a Market Failure Occurs

question 58

Multiple Choice

In a situation where a market failure occurs,

• A) Any government intervention will improve on the market outcome
• B) There is nothing that the government can do to improve on the market outcome
• C) Government intervention might improve on the market outcome
• D) It will always be preferable to have the government intervene in the market

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Definitions:

Monopolistically Competitive

A market structure in which many firms sell products or services that are similar but not identical, allowing for competition on factors other than price.

Entry Barriers

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

Long-run Equilibrium

Long-run equilibrium occurs when all producers in a market are producing at their minimum long-run average cost, and no new firms wish to enter or exit the market.

Average Cost

The total cost of production divided by the number of goods produced, also known as unit cost.