Explain three ways in which a market may fail.
What will be an ideal response?
Public goods are one of the classic cases in which markets do not work effectively. Markets cannot efficiently produce goods such as national defense or public parks that, once created, are difficult to exclude all citizens from enjoying. Therefore, these goods (and services) may have to be delivered through the public sector and financed through taxation. Markets may also fail because of externalities, meaning that the total social costs--for example, pollution--of some activities are not included in the market price of a product. And markets may also fail because the participants do not have adequate information and therefore cannot make optimal decisions.
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The text argues that state and local governments:
A. directly affect how well or poorly we live. B. have no impact on how well we live. C. have some impact on how well we live but not as much impact as the national government. D. directly affect people's lives in some states but not in others.
George Washington proposed that they
a. change the ratio of representation in the House of Representatives. b. revise the Senate. c. create a triumvirate rather than a single president. d. return to the Articles of Confederation. e. end the debates and sign the Constitution.