Market Failure Exists Whenever

question 46

Multiple Choice

Market failure exists whenever

• A)Income distribution is unequal.
• B)The market generates a suboptimal outcome of income distribution.
• C)The government intervenes in the market.
• D)Government intervention makes the income distribution worse.

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Definitions:

Financial Markets

Financial markets are platforms where individuals and entities can trade financial securities, commodities, and other fungible items of value at low transaction costs and at prices reflective of supply and demand.

NPV Projects

Projects that are evaluated based on the Net Present Value method, helping in deciding whether they contribute positively to the company's value.

Soft Rationing

Refers to the internal limitations set by a company on the funds allocated for capital projects, despite having a strong financial position.

Hard Rationing

A situation in corporate finance where there is a strict limit on the amount of new equity a company can issue.