A rationale for government involvement in a market economy is as follows:

Question

Quizplus · Accepted Answer

All three statements are valid justifications for government intervention in a market economy.

A) Markets might not always distribute economic well-being fairly, causing income inequality and creating poverty. Governments can intervene by providing welfare programs or implementing progressive taxation to redistribute income and promote equality.

B) Market failures can occur when resources are not allocated efficiently. For instance, natural monopolies might emerge in certain industries, causing higher prices and lower output. Government can regulate or publicize these monopolies.

C) Government intervention is necessary to protect property rights, and to enforce the rule of law in the market economy. Otherwise, thefts or breaches of contract might occur frequently, leading to economic instability and shrinking investor confidence.

A Rationale for Government Involvement in a Market Economy Is