📚 Learning Guide
Government Intervention and Market Efficiency
easy

How does government intervention typically affect market efficiency?

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Learning Path
Learning Path

Question & Answer
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Choose the Best Answer

A

It always improves efficiency

B

It can either improve or reduce efficiency depending on the situation

C

It has no effect on efficiency

D

It always reduces efficiency

Understanding the Answer

Let's break down why this is correct

Answer

Government intervention can affect market efficiency in several ways. When the government steps in, it may introduce rules, taxes, or subsidies that can change how businesses operate and how prices are set. For example, if the government imposes a tax on sugary drinks, the price of those drinks might go up, which could lead to fewer people buying them. While this could help reduce health problems, it might also mean that some people who enjoyed those drinks can no longer afford them, showing a trade-off between health benefits and individual choice. Overall, while intervention can help achieve certain goals, it can also disrupt the natural balance of supply and demand, sometimes leading to inefficiencies in the market.

Detailed Explanation

Government actions can change how well markets work. Other options are incorrect because Some people think that government always makes things better; It's a common belief that government has no impact.

Key Concepts

Government intervention
Topic

Government Intervention and Market Efficiency

Difficulty

easy level question

Cognitive Level

understand

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