Government failure occurs when the government becomes the tool of the rent seeker and resource allocation becomes even less efficient.

Question

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Government failure refers to situations where government intervention in the economy causes inefficiencies or leads to an allocation of resources that is worse than what would occur without that intervention. When the government becomes a tool for rent-seekers—individuals or groups that seek to gain added economic rent through manipulation or exploitation of the political process—it can lead to policies that favor specific interests at the expense of the general public, resulting in less efficient resource allocation.

Government Failure Occurs When the Government Becomes the Tool of the Rent