Question

26. When intervention is needed to resolve negative externalities, economists typically favour market based mechanisms over command and control approaches because:

1. (a) the market mechanism always produces an inefficient allocation of resources.

2. (b) governments enforcing regulations make inefficient choices.

3. (c) private firms allocate resources more efficiently than governments in situations where negative externalities exist.

4. (d) countries with governments using command and control policies have always been shown to not produce the best outcome.

5. (e) this addresses the problem of negative impacts at a lower cost.

27. What kind of good has the properties of rivalry and non-excludability?

A.private

B.public

C.exhaustible

D.common

E.collective

Answer 1

Ans 26 d. Economists favor market based mechanisms because countries with governments using command and control policies have always been shown to not produce the best outcome.

Ans 27 d. A good which is rivalrous and non-excludable in nature is common good, in that individuals cannot be excluded from use without paying for it.