In the absence of intervention, imperfect competition, externalities, public goods, and imperfect information all result in which of the following?
In the absence of intervention, imperfect competition, externalities, public goods, and imperfect information all result in which of the following? Correct Answer Market failure
B Demand curves should be added vertically to find the total demand for public goods, but not for the other items. Prices are too high (higher than marginal cost, which is the benchmark for allocative efficiency) as the result of imperfect competition. Quantities may be too high when negative externalities exist, but are too low when there are positive externalities and for public goods. An excess of pollution results only from negative externalities and perhaps imperfect information. All of these items are sources of market failure, which occurs when resources are not allocated efficiently.
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Feb 20, 2025