LS23 - Government Failure Flashcards
(6 cards)
1
Q
Government Failure
A
When government intervention designed to correct a market failure results in a less efficient allocation of resources
2
Q
Causes of Government Failure
A
- Unintended Consequences
- Distortion of price signals
- Excessive admin cost
- Information gaps
3
Q
How the government intervenes in the market to fix market failure
A
- Taxes. Indirect and Direct
- Subsidies
- Maximum and Minimum Pricing
- Tradeable Pollution Permits
- Provision of Public goods
- Provision of information
- Regulation
4
Q
Distortion of Price signals
A
This is when
- Subsidies or Taxes
- Maximum and Minimum pricing
Distort price signals and leads to an inefficient allocation of resources.
5
Q
Excessive Administrative Costs
A
The social benefit of a policy may not match up which how much it costs to administer the policy
6
Q
Information gaps
A
Where there is not sufficient information for economic agents to make fully informed decisions.
