Market Failure and the Role of Government

Surplus of the product.

Shortage of the product.

Equilibrium quantity remains unchanged.

Increase in demand for the product.

Demand for electric cars would increase, shifting the demand curve to the right.

Supply of electric cars would decrease, shifting the supply curve left due to increased manufacturing costs associated with popularity.

Demand for electric cars would decrease because increased consumer preference does not necessarily equate with actual purchasing behavior.

There would be no change since tastes and preferences have no significant impact on market outcomes according to economic theory.

It maintains social efficiency by adjusting only the distribution of goods without affecting total output.

It decreases social efficiency by preventing supply from reaching its optimal level, resulting in deadweight loss.

It increases social efficiency by ensuring that only high-quality products reach the market.

It has no impact on social efficiency as long as demand stays constant regardless of production levels.

The subsidy leads to a reduction in consumer surplus and an increase in producer surplus due to market power.

The subsidy leads to overconsumption of good X beyond its socially optimal level exacerbating inefficiency.

By resulting in initial monopoly power for producers of good X, it leads to consumer surplus and increased market power.

The subsidy leads to an increase in equity, as subsidies tend to go to those who may not need them the most.

The market produces less than the socially optimal quantity leading to higher overall economic welfare.

The market produces more than the socially optimal quantity leading to lower overall economic welfare.

The presence of externalities has no significant impact on production decisions or overall economic welfare.

The market self-corrects producing at the socially optimal quantity without affecting overall economic welfare.

Unlimited resources and limited wants

Government control over resources

Equal distribution of resources

Limited resources and unlimited wants

The actual market price will be lower and quantity produced higher than the socially efficient level.

The actual market price and quantity produced will both be equal to the socially efficient level.

The actual market price will be higher and quantity produced lower than the socially efficient level.

The actual market price and quantity produced will both be lower than the socially efficient level.

Producers investing more heavily in marketing campaigns targeted at cigarette smokers.

Some consumers might spend less on other goods due to higher cigarette prices resulting from increased taxes.

Consumers buying more healthcare products as a result of reduced cigarette consumption.

Government reallocating additional tax revenues towards public health initiatives.

Through regulation that requires levels of consumption according to exact societal benefits without considering individual preferences or costs involved.

By applying taxes on consumption that exactly match the magnitude of positive externalities leading toward underconsumption.

By subsidizing consumption too much beyond correcting for positive externality, causing overconsumption relative to socially optimal quantity.

By providing public goods as an alternative solution which always leads towards efficiency due to non-excludability characteristics of such goods.

The good has a unitary elastic demand.

The good has an inelastic demand.

The good has an elastic demand.

The price elasticity of demand is not determinable from this information.