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Market Failure & Govt intervention

Authored by Wang Jenny

Other

11th - 12th Grade

Used 37+ times

Market Failure & Govt intervention
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10 questions

Show all answers

1.

MULTIPLE CHOICE QUESTION

20 sec • 1 pt

Efficiency in markets occurs when the social optimum is achieved, where MPB = MPC, maximising society's welfare

True

False

Answer explanation

It should be MSB= MSC

2.

FILL IN THE BLANK QUESTION

30 sec • 1 pt

Efficient allocation may

not result in equitable outcomes. An efficient allocation may not be a ____ (4 letters) allocation

Answer explanation

Equity could be defined as fairness in the distribution of economic welfare.

An efficient allocation may not be a fair allocation.

3.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which of the following statement is correct?

Public Transport is a public good

Related sources of market failure for merit goods are positive externalities and inequity

Occupational immobility of labour is a source of market failure

Public goods are goods that are rivarlrous and excludable in consumption

Answer explanation

Public Goods are goods that are non-rivalrous and non excludable in consumption. Public transport is NOT a public good.

Inequity is NOT a source of market failure. A market can be efficient but inequitable.

Immobility of labour such as occupational immobility is a source of market failure. Resources (i.e. labour) cannot respond to incentives to produce the goods.

4.

MULTIPLE SELECT QUESTION

20 sec • 1 pt

Select answers that apply: Why do govt intervene in the context of university education?

It is a Public good

Positive Externalities

Imperfect Information

Inequity

5.

DRAW QUESTION

45 sec • 1 pt

Illustrate how existence of positive externality in consumption of a good results in market failure.

Media Image

Answer explanation

Media Image

check for

1. Correct axis

2. MSB > MPB due to existence of MEB

3. correct indication of Qm and Qs

To show consequences of market failure:

1. Qm<Qs (underconsumption)

2. deadweight loss of area ABC

6.

DRAW QUESTION

45 sec • Ungraded

Complete the diagram to show how subsidy to producers would help to underconsumption of university education.

Media Image

Answer explanation

Media Image

The yellow line shows MPC-subsidy. This shows how subidy (=MEB at Qs) lowers the unit cost of production and hence increase equilibrium quantity, Qm towards Qs.

7.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What one is a correct explanation for underconsumption of university education due to imperfect information?

MPBperceived > MPBactual

MPBperceived < MPBactual

MSBperceived > MSBactual

MSBperceived < MSBactual

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