📚 Learning Guide
Market Failures and Government Role
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How can government intervention effectively address market failures like monopolies?

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Learning Path

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Choose the Best Answer

A

By completely removing all regulations to encourage competition

B

By breaking up monopolies or regulating prices to promote fair competition

C

By allowing monopolies to operate freely to maximize profits

D

By subsidizing monopolies to improve their market efficiency

Understanding the Answer

Let's break down why this is correct

Answer

Government intervention can effectively address market failures like monopolies by promoting competition and protecting consumers. When one company controls a market, it can set high prices and limit choices for buyers, which is not good for the economy. The government can step in by creating laws that prevent monopolies from forming or by breaking up companies that have too much control. For example, if a big tech company starts to dominate the market and push out smaller businesses, the government might investigate and take action to ensure fair competition. This way, consumers can benefit from lower prices and more options in the market.

Detailed Explanation

Government can break up monopolies or set rules on prices. Other options are incorrect because Some might think that removing rules will help businesses grow; Allowing monopolies to operate freely seems like it would help them make money.

Key Concepts

Market Failures
Government Intervention
Monopolies
Topic

Market Failures and Government Role

Difficulty

medium level question

Cognitive Level

understand

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