Question

Which of the following is NOTa good reason for a government to intervene in a market economy?a.Protecting property rights b.Correcting a market failure due to externalities c.Promoting the equality of income in the society through re-distribution and welfare policies d.Providing consumption goods for the citizens e.Correcting a market failure due to monopolies market power f.All of the above items are good reasons for the government to intervene in a market economy.

Answer 1

Which of the following is NOT a good reason for a government to intervene in a market economy?

a. Protecting property rights

b. Correcting a market failure due to externalities

c. Promoting the equality of income in the society through re-distribution and welfare policies

d. Providing consumption goods for the citizens

e.Correcting a market failure due to monopolies market power

f. All of the above items are good reasons for the government to intervene in a market economy.

Correct answer is : f. All are good reasons for government intervention. Externality occurs when people not involved in decision making are affected either positively or negatively.

Hence to correct it govt. intervention is needed. example- tax to reduce alcohol consumption, subsidy for education.Hence b, c, d and e needs intervention. Option a also needs govt. intervention as to protect property rights and allocate resources efficiently.