Government regulation is appropriate when there is market failure and regulation is cost-effectivE.

Question

Quizplus · Accepted Answer

Market failure refers to situations where the market does not allocate resources efficiently, resulting in inefficiencies and societal costs. In such cases, government regulation can be appropriate to correct the market failure and promote social welfare. However, regulation should be cost-effective, i.e., the benefits of regulation should outweigh its costs, and alternative solutions should be considered before resorting to regulation.

Government Regulation Is Appropriate When There Is Market Failure and Regulation