Economics (AS & A Level) · May / June 2023 · Paper 33 · Question 17
9708Government policies to achieve efficient resource allocation and correct market failure
A reason for government intervention in the workings of the economy is to attempt to correct a market failure. Sometimes, though, government failure may occur. What is not a possible reason for government failure?
- AGovernments may have to make decisions on the basis of out-of-date information.
- BGovernments may make decisions that reduce negative externalities.
- CThe extent of the market failure may be difficult to judge.
- DWhen circumstances change, a government may be unable to respond quickly.
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Correct answer: B. Governments may make decisions that reduce negative externalities.
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