Question

Even though markets do a great job in organizing economic activity, governments are needed to do all of the following EXCEPT: Select one: a. establish and enforce property rights. b. intervene when markets fail due to externalities. c. intervene when markets fail due to market power. d. decide what and how much should be produced.

Answer 1

The correct answer is option d.

Step-by-step explanation:

Market forces are generally able to efficiently organize economic activity. The allocation of resources, determination of price, etc is done efficiently through the market forces. But in some cases, the market fails inefficient allocation which leads to overproduction or underproduction.

In such situations, the government needs to interfere in the market to efficiently allocate resources.

The government needs to interfere to enforce property rights, to correct externalities, and when the market falls due to the concentration of market power.

The decision of what to produce and how much to produce is handled by the market forces.