Multiple Choice
Government intervention in an effort to promote allocative efficiency in all industries would likely impose a cost in terms of economic growth.One explanation for this is that
A) some policies to promote allocative efficiency will lead to increased income inequality.
B) some policies to promote allocative efficiency will lead to decreased income inequality.
C) correcting externalities inevitably reduces the economy's growth rate.
D) firms in perfectly competitive industries that are already allocatively efficient would also be affected by the intervention and become inefficient.
E) much of the innovation and productivity growth that leads to economic growth comes from oligopolistic firms.
Correct Answer:
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