Government intervention may achieve a more optimal outcome than the market mechanism when addressing
A) Inefficient bureaucracy.
B) Consumption of cigarettes.
C) Theme park construction.
D) None of the choices are correct.

Question

Quizplus · Accepted Answer

Consumption of cigarettes is a negative externality, as it harms others through secondhand smoke and increases healthcare costs. The market mechanism does not account for these costs, leading to overproduction and consumption of cigarettes. Government intervention, such as implementing taxes or regulations, can lead to a more optimal outcome by reducing consumption and mitigating the negative externalities.

Government Intervention May Achieve a More Optimal Outcome Than the Market