The federal government regulates how much carbon dioxide a factory can emit.Which economic principle does this statement BEST represent?
A)There are gains from trade.
B)"How much" is a decision at the margin.
C)Markets usually lead to efficiency.
D)When markets don't achieve efficiency,government intervention can improve society's welfare.

Question

Quizplus · Accepted Answer

The statement suggests that the market has failed to achieve an efficient outcome with regards to carbon dioxide emissions, hence the need for government intervention to improve societal welfare. This is the underlying principle of market failure and the need for government intervention in cases where the market fails to achieve optimal outcomes.

The Federal Government Regulates How Much Carbon Dioxide a Factory