LS23 - Government Failure Flashcards
1
Q
Government failure
A
When gov intervention designed to correct market failure results in less efficient allocation of resources
2
Q
Unintended consequences
A
Gov failure can arise through unintended consequences when it reverses or causes an unexpected affect from gov intervention
3
Q
Distorting of price signals
A
Max and min prices can result in shortages and gluts. Subsidies may result in lower prices and greater consumption of goods with external costs (subsidy for sugar farmers)
4
Q
Excessive admin cost
A
Admin costs of gov intervention may outweigh benefits that result from it
5
Q
Information gaps
A
Lack of sufficient information can lead to gov intervention being set in an ineffective manner
