Theme 1.4

Question 1

What is government failure?

Answer 1

When a government intervenes in a market but they worsen the market failure or make a new failure

Question 2

What are 5 types of government failure?

Answer 2

Distortion of price signals
Unintended consequences
Excessive administrative costs
Information gaps
Only focusing on short term

Question 3

Why is the distortion of price signals

Answer 3

The government stops prices being set where they should be. Create excess demand and supply

Question 4

Why are unintended obedience

Answer 4

The action of consumers, producers or government always have unanticipated consequences. Poole may bind ways of avoid the new law

Question 5

What is ‘focusing on short term’

Answer 5

The government doesn’t think about the long term effects of their actions

Question 6

What are excessive administrative costs

Answer 6

The cost of enforcing an intervention are higher than expected.

Question 7

What are information gaps in government failure

Answer 7

When politicians may not have all the information about a type of service to provide