Studied by 0 peopleWhen the costs of intervention outweigh the benefit of intervention, the end result is a worsening of the allocation of scarce resources harming social welfare
What is government market failure?
Information failure
Admin and enforcement costs very high
Regulatory capture
Unintended consequences
What are the 4 types of government failure?
Valuing externalities wrong therefore the right level of policy is required
What happens when government failure is caused by information gap?
Regulation, subsidies, state provision and price controls are too expensive
What happens when government failure is caused by high policy enforcement costs?
Intervention causes consequences which weren’t intended, can cause: Black markets, bad impact on poor, bad impact on firms and may lead to unemployment
What happens when government failure is caused by unintended consequences?
When interests of society are overlooked for interest of firms and ceos, they influence the regulator which can reduce regulation of monopoly power
What happens when government failure is caused by regulatory capture?
Note
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