Practice Questions
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What is a primary cause of market failure that may necessitate government intervention?
Externalities happen when someone's actions affect others, like pollution. Other options are incorrect because Some might think perfect competition ca...
How does government intervention typically address the issue of monopoly power in a market?
Governments can break up monopolies or control their prices. Other options are incorrect because Some might think that removing all rules helps the ma...
Which of the following scenarios best illustrates government intervention through price controls to correct a market failure?
When the government sets a maximum price for essential medicines, it helps people afford what they need. Other options are incorrect because This opti...
How do subsidies interact with deadweight loss in the context of the tragedy of the commons, and what role can government intervention play to mitigate these effects?
Subsidies can sometimes make deadweight loss worse. Other options are incorrect because Some people think subsidies can fix all problems; It's a commo...
Which of the following scenarios best illustrates the interplay between information asymmetry, equity versus efficiency, and the tragedy of the commons?
This example shows how the government helps manage resources. Other options are incorrect because This option shows a company hiding problems; This sc...
What is a primary cause of market failure that may necessitate government intervention?
Externalities happen when someone's actions affect others without paying for it. Other options are incorrect because Some might think perfect competit...
What is an externality, and how can it lead to market failure?
An externality is a cost or benefit that affects someone who is not part of a deal. Other options are incorrect because Some might think a tax is an e...
Which of the following is an example of a public good that the government typically provides?
National defense is a public good. Other options are incorrect because Some might think private security helps everyone like national defense; People ...
A company has dominated the smartphone market for several years, leading to significantly higher prices and limited innovation. Which category best describes this situation?
This situation shows a market failure. Other options are incorrect because Some might think this is perfect competition, but that's when many companie...
Arrange the steps that illustrate the government's role in correcting market failures due to monopolies.
First, the government needs to find out if a company is a monopoly and how it affects people. Other options are incorrect because This option suggests...
How can government intervention effectively address monopolies in a free market?
Introducing more competition helps break up monopolies. Other options are incorrect because Some think regulating prices makes things fair; Allowing m...
Monopoly:Market Failure :: Government Intervention:?
Government intervention helps protect consumers from unfair practices. Other options are incorrect because Some might think government makes things mo...
What is the primary cause of market failures when a single company dominates an industry and restricts competition?
When one company controls the market, it can set high prices and limit choices. Other options are incorrect because Some think too many rules hurt the...
A local cable company has become the only provider in your city, leading to significantly higher prices for customers. Which of the following best describes the situation and the potential role of government intervention?
This situation shows a market failure. Other options are incorrect because Some might think that no competition is good for the market; This answer su...
Which of the following statements accurately describe the role of government in addressing market failures? Select all that apply.
All the statements misunderstand how government can help fix problems in the market. Other options are incorrect because This suggests that breaking u...
In cases of market failures, government intervention is often necessary to ensure fair competition and prevent negative outcomes such as monopolies. One common method the government uses is to __________ monopolies by promoting competition and regulating prices.
The government tries to break up monopolies. Other options are incorrect because Some might think the government should help monopolies grow; Ignoring...
How can government intervention effectively address market failures like monopolies?
Government can break up monopolies or set rules on prices. Other options are incorrect because Some might think that removing rules will help business...
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