A Free Market Fails When

question 130

Multiple Choice

A free market fails when

• A)there is government intervention.
• B)there is an external effect in either production, consumption, or both.
• C)firms that produce goods which create positive externalities go bankrupt.
• D)firms that produce goods which create negative externalities earn high profits.

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Definitions:

New Tax

A fiscal policy instrument where the government imposes charges on individuals or businesses to raise revenue or to influence behavior.

Public Interest

The welfare or well-being of the general public and society as a whole, often considered in policy-making and legal contexts.

Non-Competitive Market

A market situation where individual sellers have significant control over prices and market share, reducing the influence of consumer choice.

Competitive Market

A market structure characterized by many buyers and sellers, free entry and exit, and a product for which every seller’s offering is identical.