will goverment intervention into a market be able to solve a market failure? explain

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Expert Solution

Market failures refers to the economic situations in which the markets fail in the economy as a result of inefficient allocation of resources which leads to irrational outcomes.
Market failures may be caused by various reasons like externalities, lack of public goods, imperfect information, monopoly power etc.
Government intervention into a market seems to be an efficient solution to solve these failures. This is because various government policies and regulations are best to compensate the losses from market failures.
Restrictive trade practices or anti Monopoly laws passed by the government can solve market failures. The government puts forward various taxation and tax regulation policies in order to correct market failures. These regulations restricts a monopoly firm from raising the prices above the equilibrium level.
Thus government interventions into a market will be able to solve a market failure by bringing these markets to a fair competitive level.

Rahul Sunny answered 10 months ago

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