Does government failure necessarily condone an extreme libertarian point of view where the government does not intervene in markets at all?
What will be an ideal response?
Government failure refers to the distortions caused by political economy conflicts and politicians and bureaucrats acting in their own interests rather than as representatives of the electorate and society. However, the presence of government failure does not necessarily mean that governments should not intervene to correct market failures. Given that both governments and markets can fail, cost-benefit analysis can be used to quantify the costs of market failure as well as government failure. Cost-benefit analysis might give us a better handle on what types of activities should be within the sphere of the government and which ones should be left to markets, even when markets are imperfect.
A-head: MARKET FAILURE VS. GOVERNMENT FAILURE
Concept: Cost-benefit analysis, market failure, government failure
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The payoff matrix of economic profits above displays the possible outcomes for Bob and Jane who are involved in game of whether or not to advertise. After each player chooses his or her best strategy and sees the result
A) only Bob would like to change his decision. B) neither player would be willing to change his or her decision unless the other player also changes his or her decision. C) if Jane does not change her decision, Bob would like to change his. D) if Bob does not change his decision, Jane would like to change hers.
Unemployment that occurs from fundamental technological changes in production, or from the substitution of new goods for customary ones, is known as
a. underemployment b. seasonal unemployment c. frictional unemployment d. structural unemployment e. cyclical unemployment