If the competitive equilibrium does not lead to the efficiency-maximizing outcome,then government intervention:
A) will increase efficiency.
B) will reduce efficiency.
C) may increase or decrease efficiency.
D) will not affect efficiency.

Question

Quizplus · Accepted Answer

The fact that the competitive equilibrium does not lead to the efficiency-maximizing outcome indicates the presence of market failure. Government intervention can potentially increase efficiency by correcting the market failure, but it may also decrease efficiency if the intervention is not well-designed or implemented. Therefore, the impact on efficiency is uncertain and could go either way.

If the Competitive Equilibrium Does Not Lead to the Efficiency-Maximizing