Markets fail to produce an efficient allocation of resources, but governments also fail because

Question

Quizplus · Accepted Answer

Government failure occurs when a government intervention leads to a less efficient allocation of resources than would have occurred through market forces. One reason for this is that measuring social damages and benefits is difficult and imprecise, which can lead to incorrect policy decisions. For example, a government may impose a tax or a subsidy, but if the social cost or benefit is incorrectly measured, this could lead to unintended consequences and a misallocation of resources.

Markets Fail to Produce an Efficient Allocation of Resources, but Governments