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Another Multiple Choice

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    Which one of the following is the best definition of government failure?

    A) Government Intervention which leads to a loss of economic welfare.
    B) Government failing to allocate resources efficiently.
    C) Government failing to intervene with the market.
    D) Government intervention which fails to have a positive effect on the economy.

    I thought the answer was B, but my teacher said it was A. Can someone explain please?

    My exam board is edexcel also, so I need an explanation worth 3 marks, not just the correct answer.

    Thanks,
    Sora
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    (Original post by Sora)
    Which one of the following is the best definition of government failure?

    A) Government Intervention which leads to a loss of economic welfare.
    B) Government failing to allocate resources efficiently.
    C) Government failing to intervene with the market.
    D) Government intervention which fails to have a positive effect on the economy.

    I thought the answer was B, but my teacher said it was A. Can someone explain please?

    My exam board is edexcel also, so I need an explanation worth 3 marks, not just the correct answer.

    Thanks,
    Sora
    A) The government has made things worse. Its actions have caused a loss of welfare.

    B) The situation could have been improved by government, but still be suboptimal. The government may have improved welfare compared to a free market, but welfare is still not maximized.
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    Much appreciated.

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